RESERVE BANK OF INDIA

www.rbi.org.in

RBI/2010-11/74 DBOD.No.BP.BC.21 /21.04.048/2010-11 All Commercial Banks (excluding RRBs) Dear Sir Master Circular - Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances Please refer to the Master Circular No. DBOD.No.BP.BC. 17/21.04.048/2009-10 dated July 1, 2009 consolidating instructions / guidelines issued to banks till June 30, 2009 on matters relating to prudential norms on income recognition, asset classification and provisioning pertaining to advances. 2. The Master Circular has now been suitably updated by incorporating instructions July 1, 2010

issued up to June 30, 2010 and is attached. It has also been placed on the RBI web-site (http://www.rbi.org.in). We advise that this revised Master Circular consolidates the instructions contained in the circulars listed in the Annex 9.

Yours faithfully

(B. Mahapatra) Chief General Manager-in- Charge Encls: As above

Department of Banking Operations and Development, Central Office, 12th floor, Central Office Building, Mumbai – 400 001. Tel No: (91-22) 22601000 /Fax No. (91-22) 22705691 & (91-22) 22705692 - Email ID:cgmicdbodco@rbi.org.in

DBOD-MC on IRAC Norms-2010

MASTER CIRCULAR - PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSET CLASSIFICATION AND PROVISIONING PERTAINING TO ADVANCES TABLE OF CONTENTS

Para No.

Particulars

Page No.

PART A
1 2 2.1 2.2 2.3 3 3.1 3.2 3.3 3.4 3.5 4 4.1 4.1.1 4.1.2 4.1.3 4.2 4.2.3 4.2.4 4.2.5 4.2.6 4.2.7 4.2.8 4.2.9 4.2.10 4.2.11 4.2.12 4.2.13 4.2.14 4.2.15 4.2.16 4.2.17 4.2.18 4.2.19 GENERAL DEFINITIONS Nonperforming assets „Out of Order' status „Overdue‟ INCOME RECOGNITION Income recognition policy Reversal of income Appropriation of recovery in NPAs Interest Application Computation of NPA levels ASSET CLASSIFICATION Categories of NPAs Substandard Assets Doubtful Assets Loss Assets Guidelines for classification of assets Availability of security / net worth of borrower/ guarantor Accounts with temporary deficiencies Upgradation of loan accounts classified as NPAs Accounts regularised near about the balance sheet date Asset Classification to be borrower wise and not facility-wise Advances under consortium arrangements Accounts where there is erosion in the value of security Advances to PACS/FSS ceded to Commercial Banks Advances against Term Deposits, NSCs, KVP/IVP, etc Loans with moratorium for payment of interest Agricultural advances Government guaranteed advances Projects under implementation Takeout Finance Post-shipment Supplier's Credit Export Project Finance Advances under rehabilitation approved by BIFR/ TLI 1 1 1 2 2 2 2 3 3 4 4 4 4 4 4 5 5 5 5 6 6 7 8 8 8 9 9 9 11 11 16 17 17 18

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DBOD-MC on IRAC Norms-2010

5 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 6

PROVISIONING NORMS General Loss assets Doubtful assets Substandard assets Standard assets Floating provisions Provisions for advances at higher than prescribed rates Provisions on Leased Assets Guidelines for Provisions under Special Circumstances Provisioning Coverage Ratio GUIDELINES ON SALE OF FINANCIAL ASSETS TO SECURITISATION COMPANY (SC)/ RECONSTRUCTION COMPANY (RC) Scope Structure Financial assets which can be sold Procedure for sale of banks‟/ FIs‟ financial assets to SC/ RC, including valuation and pricing aspects Prudential norms for banks/ FIs for the sale transactions Disclosure Requirements Related Issues GUIDELINES ON PURCHASE/SALE OF NON PERFORMING ASSETS Scope Structure Procedure for purchase/ sale of non performing financial assets, including valuation and pricing aspects Prudential norms for banks for the purchase/ sale transactions Disclosure Requirements WRITING OFF OF NPAs

18 18 18 19 19 20 21 22 23 23 29 30

6.1 6.2 6.3 6.4 6.5 6.6 6.7 7

30 30 30 31 32 34 34 34

7.1 7.4 7.5 7.6 7.7 8

35 35 35 37 39 39

PART B Prudential guidelines on Restructuring of Advances
9 10 11 11.1 11.2 11.3 11.4 12 12.1 12.2 Background on Restructuring of advances Key Concepts General Principles and Prudential Norms for Restructured Advances Eligibility criteria for restructuring of advances Asset classification norms Income recognition norms Provisioning norms Prudential Norms for Conversion of Principal into Debt / Equity Asset classification norms Income recognition norms
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41 42 42 42 44 45 45 47 47 47

DBOD-MC on IRAC Norms-2010

Provisioning.8 Annex . Debt or Equity Instruments Asset classification norms Income recognition norms Valuation and provisioning norms Special Regulatory Treatment for Asset Classification Applicability of special regulatory treatment Elements of special regulatory framework Miscellaneous Disclosures Illustrations Objective of Restructuring PART C 47 48 48 48 49 49 49 49 51 52 52 52 Agricultural Debt Waiver and Debt Relief Scheme.3 13 13.Prudential Norms on Income Recognition. Gross NPAs.2009) List of circulars consolidated by the Master Circular 60 61 62 63 75 77 78 80 84 53 53 53 54 57 57 57 57 58 4 DBOD-MC on IRAC Norms-2010 .1 21.12.3 14 14.3 20. Net Advances and Net NPA List of relevant direct agricultural advances Format for Computing Provisioning Coverage Ratio (PCR) Organisational Framework for Restructuring of Advances Under Consortium / Multiple Banking / Syndication Arrangements Key Concepts in Restructuring Particulars of Accounts Restructured Asset Classification of Restructured Accounts under the Guidelines Special Regulatory Relaxations for Restructuring (Available upto June 30.2 13.2 20. 2008 (ADWDRS). and Capital Adequacy 19 20 20.9 Details of Gross Advances.1 14.1 13.2 The background Prudential Norms for the Borrowal Accounts Covered under the ADWDRS Norms for the Accounts subjected to Debt Waiver Norms for the Accounts subjected to the Debt Relief Grant of Fresh Loans to the Borrowers covered under the ADWDRS Capital Adequacy Subsequent Modifications to the Prudential Norms Interest payment by the GOI Change in instalment schedule of “other farmers” under the Debt Relief Scheme ANNEXES Annex -1 Annex -2 Annex -3 Annex -4 Annex -5 Annex -6 Annex .7 Annex . Asset Classification.2 15 16 17 18 Valuation and provisioning norms Prudential Norms for Conversion of Unpaid Interest into 'Funded Interest Term Loan' (FITL).4 21 21.1 20.

Master Circular .1 An asset. i. 5 DBOD-MC on IRAC Norms-2010 . in a phased manner. the provisioning should be made on the basis of the classification of assets based on the period for which the asset has remained nonperforming and the availability of security and the realisable value thereof.4 With the introduction of prudential norms. including a leased asset.1.1 DEFINITIONS Non performing Assets 2. 1. Likewise.Prudential Norms on Income Recognition. 1. Also.2 A non performing asset (NPA) is a loan or an advance where.1. under the Health Code system also cease to be a supervisory requirement. becomes non performing when it ceases to generate income for the bank. 1. This would go a long way to facilitate prompt repayment by the borrowers and thus improve the record of recovery in advances. realistic repayment schedules may be fixed on the basis of cash flows with borrowers. 1. 2. 2. the Reserve Bank of India has introduced. Narasimham).3 Banks are urged to ensure that while granting loans and advances.1 GENERAL In line with the international practices and as per the recommendations made by the Committee on the Financial System (Chairman Shri M. all related reporting requirements. continue the system at their discretion as a management information tool. etc. prudential norms for income recognition. As such. Asset Classification and Provisioning pertaining to Advances Part A 1. the classification of assets of banks has to be done on the basis of objective criteria which would ensure a uniform and consistent application of the norms. Banks may. however. the Health Code-based system for classification of advances has ceased to be a subject of supervisory interest. 2. interest and/ or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan. asset classification and provisioning for the advances portfolio of the banks so as to move towards greater consistency and transparency in the published accounts.2 The policy of income recognition should be objective and based on record of recovery rather than on any subjective considerations.

ii. 3. the amount of liquidity facility remains outstanding for more than 90 days. these accounts should be treated as 'out of order'.1. the account remains „out of order‟ as indicated at paragraph 2. Therefore. the instalment of principal or interest thereon remains overdue for one crop season for long duration crops.1. 2.3 Banks should. iii. the overdue receivables representing positive mark-to-market value of a derivative contract. v.2 below. classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter. in respect of a securitisation transaction undertaken in terms of guidelines on securitisation dated February 1. in respect of derivative transactions. 2. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted.3 „Overdue‟ Any amount due to the bank under any credit facility is „overdue‟ if it is not paid on the due date fixed by the bank. in respect of an Overdraft/Cash Credit (OD/CC). but there are no credits continuously for 90 days as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period. 2.2 „Out of Order‟ status An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power. the instalment of principal or interest thereon remains overdue for two crop seasons for short duration crops. vi. if these remain unpaid for a period of 90 days from the specified due date for payment. 3.1 of The policy of income recognition has to be objective and based on the record Internationally income from nonperforming assets (NPA) is not recovery.1 INCOME RECOGNITION Income Recognition Policy 3. vii. the banks should not charge and take to income account 6 DBOD-MC on IRAC Norms-2010 . 2006. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/drawing power. recognised on accrual basis but is booked as income only when it is actually received. iv.

This will apply to Government guaranteed accounts also.2.1. should be reversed or provided for in the current accounting period. including bills purchased and discounted. towards principal or interest due).interest on any NPA.2 In respect of NPAs. provided adequate margin is available in the accounts. if uncollected. the interest on such advances should not be taken to income account unless the interest has been realised. commission and similar income that have accrued should cease to accrue in the current period and should be reversed with respect to past periods. interest on advances against term deposits.1. 3. fees.2 Reversal of income 3.1. 3.2. 3. 3.3 Fees and commissions earned by the banks as a result of renegotiations or rescheduling of outstanding debts should be recognised on an accrual basis over the period of time covered by the renegotiated or rescheduled extension of credit. 3. KVPs and Life policies may be taken to income account on the due date.3.3 Appropriation of recovery in NPAs 3.2 However. IVPs. becomes NPA.1 Interest realised on NPAs may be taken to income account provided the credits in the accounts towards interest are not out of fresh/ additional credit facilities sanctioned to the borrower concerned.e.2.3 Leased Assets The finance charge component of finance income [as defined in „AS 19 Leases‟ issued by the Council of the Institute of Chartered Accountants of India (ICAI)] on the leased asset which has accrued and was credited to income account before the asset became nonperforming.2 In the absence of a clear agreement between the bank and the borrower for the purpose of appropriation of recoveries in NPAs (i.1 If any advance. the entire interest accrued and credited to income account in the past periods. 3. 3.3.4 If Government guaranteed advances become NPA. 3. should be reversed if the same is not realised. and remaining unrealised. NSCs. banks should adopt an accounting principle and exercise the right of 7 DBOD-MC on IRAC Norms-2010 .

the current net worth of the borrower/ guarantor or the current market value of the security charged is not enough to ensure recovery of the dues to the banks in full. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as sub8 DBOD-MC on IRAC Norms-2010 . For the purpose of computing Gross Advances. 4. In other words. if deficiencies are not corrected. such an asset will have well defined credit weaknesses that jeopardise the liquidation of the debt and are characterised by the distinct possibility that the banks will sustain some loss. 3. In such cases. Gross NPAs and Net NPAs. banks should reverse the interest already charged and not collected by debiting Profit and Loss account.2 Doubtful Assets With effect from March 31. 4.appropriation of recoveries in a uniform and consistent manner. banks may continue to record such accrued interest in a Memorandum account in their books. a substandard asset would be one. 2005. an asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. However. as per the format in Annex -1. and stop further application of interest. Net Advances. Loss Assets 4.4 Interest Application On an account turning NPA.1 ASSET CLASSIFICATION Categories of NPAs Banks are required to classify nonperforming assets further into the following three categories based on the period for which the asset has remained nonperforming and the realisability of the dues: i. which has remained NPA for a period less than or equal to 12 months. interest recorded in the Memorandum account should not be taken into account.1. 3.1. Substandard Assets ii.1 Substandard Assets With effect from 31 March 2005. 4. Doubtful Assets iii.5 Computation of NPA levels Banks are advised to compute their Gross Advances.

Bank should not classify an advance account as NPA merely due to the existence of some deficiencies which are temporary in nature such as non-availability of adequate drawing power based on the latest available stock statement. especially in respect of high value accounts. The cut off point should be valid for the entire accounting year. 4. 4.2. balance 9 DBOD-MC on IRAC Norms-2010 . such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value.2.2. The system should ensure that doubts in asset classification due to any reason are settled through specified internal channels within one month from the date on which the account would have been classified as NPA as per extant guidelines.3 Availability of security / net worth of borrower/ guarantor The availability of security or net worth of borrower/ guarantor should not be taken into account for the purpose of treating an advance as NPA or otherwise. except to the extent provided in Para 4. Responsibility and validation levels for ensuring proper asset classification may be fixed by the banks. conditions and values – highly questionable and improbable.4 Accounts with temporary deficiencies The classification of an asset as NPA should be based on the record of recovery.2 Guidelines for classification of assets 4. as income recognition is based on record of recovery.2 Banks should establish appropriate internal systems to eliminate the tendency to delay or postpone the identification of NPAs.2.3 Loss Assets A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. 4.2. In other words. 4. classification of assets into above categories should be done taking into account the degree of well-defined credit weaknesses and the extent of dependence on collateral security for realisation of dues. The banks may fix a minimum cut off point to decide what would constitute a high value account depending upon their respective business levels.standard.1 Broadly speaking. with the added characteristic that the weaknesses make collection or liquidation in full.9.1. – on the basis of currently known facts. 4.

ii) Regular and ad hoc credit limits need to be reviewed/ regularised not later than three months from the due date/date of ad hoc sanction. Where the account indicates inherent weakness on the basis of the data available. 4. the branch should furnish evidence to show that renewal/ review of credit limits is already on and would be completed soon. an account where the regular/ ad hoc credit limits have not been reviewed/ renewed within 180 days from the due date/ date of ad hoc sanction will be treated as NPA. Drawing power is required to be arrived at based on the stock statement which is current.2 and 14. In any case.outstanding exceeding the limit temporarily. Hence. the account should be deemed as a NPA. considering the difficulties of large borrowers. With regard to upgradation of a restructured/ rescheduled account which is classified as NPA contents of paragraphs 11. However. delay beyond six months is not considered desirable as a general discipline. would be deemed as irregular. A working capital borrowal account will become NPA if such irregular drawings are permitted in the account for a continuous period of 90 days even though the unit may be working or the borrower's financial position is satisfactory. 10 DBOD-MC on IRAC Norms-2010 .2. non-submission of stock statements and non-renewal of the limits on the due date.2 in the Part B of this circular will be applicable.2. The outstanding in the account based on drawing power calculated from stock statements older than three months. stock statements relied upon by the banks for determining drawing power should not be older than three months. the account should no longer be treated as nonperforming and may be classified as „standard‟ accounts.6 Accounts regularised near about the balance sheet date The asset classification of borrowal accounts where a solitary or a few credits are recorded before the balance sheet date should be handled with care and without scope for subjectivity. In other genuine cases. 4. In the matter of classification of accounts with such deficiencies banks may follow the following guidelines: i) Banks should ensure that drawings in the working capital accounts are covered by the adequacy of current assets. the banks must furnish satisfactory evidence to the Statutory Auditors/Inspecting Officers about the manner of regularisation of the account to eliminate doubts on their performing status. etc. since current assets are first appropriated in times of distress. In case of constraints such as non-availability of financial statements and other data from the borrowers.5 Upgradation of loan accounts classified as NPAs If arrears of interest and principal are paid by the borrower in the case of loan accounts classified as NPAs.

representing positive mark-to-market value of the foreign exchange derivative contracts (other than forward contract and plain vanilla swaps and options) that were entered into during the period April 2007 to June 2008. when any other facility granted to the borrower is classified as NPA. in case documents under LC are not accepted on presentation or the payment under the LC is not made on the due date by the LC issuing bank for any reason and the borrower does not immediately make good the amount disbursed as a result of discounting of concerned bills. v) If the client concerned is also a borrower of the bank enjoying a Cash Credit or Overdraft facility from the bank. iii) The bills discounted under LC favouring a borrower may not be classified as a Non-performing advance (NPA). In case the overdues arising from forward contracts and plain vanilla swaps and options become NPAs. the balance outstanding in that account also should be treated as a part of the borrower‟s principal operating account for the purpose of application of prudential norms on income recognition. even if overdue for a period of 90 days or more.2.4. which has already crystallised or might crystallise in future and is / becomes receivable from the client. as per the extant IRAC norms. only the current credit exposure (not the potential future exposure) will be classified as a non-performing asset after an overdue period of 90 days. ii) If the debits arising out of devolvement of letters of credit or invoked guarantees are parked in a separate account. any amount. the outstanding bills discounted will immediately be classified as NPA with effect from the date when the other facilities had been classified as NPA. Accordingly. However. This amount. vi) In cases where the contract provides for settlement of the current mark-to-market value of a derivative contract before its maturity. if these remain unpaid for 90 days or more. will not make other funded facilities provided to the client. though such receivable overdue for 90 days or more shall itself be classified as NPA. however. as per extant norms. Therefore. NPA on account of the principle of borrower-wise asset classification. should be parked in a separate account maintained in the name of the client / counterparty. The principle of borrower-wise asset classification would be applicable here also. The classification of all other assets of such clients will. 11 DBOD-MC on IRAC Norms-2010 . all other funded facilities granted to the client shall also be classified as nonperforming asset following the principle of borrower-wise classification as per the existing asset classification norms. the receivables mentioned at item (iv) above may be debited to that account on due date and the impact of its non-payment would be reflected in the cash credit / overdraft facility account. all the facilities granted by a bank to a borrower and investment in all the securities issued by the borrower will have to be treated as NPA/NPI and not the particular facility/investment or part thereof which has become irregular.7 Asset Classification to be borrower-wise and not facility-wise i) It is difficult to envisage a situation when only one facility to a borrower/one investment in any of the securities issued by the borrower becomes a problem credit/investment and not others. asset classification and provisioning. continue to be governed by the extant IRAC norms. iv) The overdue receivables representing positive mark-to-market value of a derivative contract will be treated as a non-performing asset.

vii) As the overdue receivables mentioned above would represent unrealised income already booked by the bank on accrual basis, after 90 days of overdue period, the amount already taken to 'Profit and Loss a/c' should be reversed.

4.2.8

Advances under consortium arrangements

Asset classification of accounts under consortium should be based on the record of recovery of the individual member banks and other aspects having a bearing on the recoverability of the advances. Where the remittances by the borrower under consortium lending arrangements are pooled with one bank and/or where the bank receiving remittances is not parting with the share of other member banks, the account will be treated as not serviced in the books of the other member banks and therefore, be treated as NPA. The banks participating in the consortium should, therefore, arrange to get their share of recovery transferred from the lead bank or get an express consent from the lead bank for the transfer of their share of recovery, to ensure proper asset classification in their respective books.

4.2.9 Accounts where there is erosion in the value of security/frauds committed by borrowers In respect of accounts where there are potential threats for recovery on account of erosion in the value of security or non-availability of security and existence of other factors such as frauds committed by borrowers it will not be prudent that such accounts should go through various stages of asset classification. In cases of such serious credit impairment the asset should be straightaway classified as doubtful or loss asset as appropriate: i. Erosion in the value of security can be reckoned as significant when the realisable value of the security is less than 50 per cent of the value assessed by the bank or accepted by RBI at the time of last inspection, as the case may be. Such NPAs may be straightaway classified under doubtful category and provisioning should be made as applicable to doubtful assets. ii. If the realisable value of the security, as assessed by the bank/ approved valuers/ RBI is less than 10 per cent of the outstanding in the borrowal accounts, the existence of security should be ignored and the asset should be straightaway classified as loss asset. It may be either written off or fully provided for by the bank. 4.2.10 Advances to PACS/FSS ceded to Commercial Banks In respect of agricultural advances as well as advances for other purposes granted by banks to PACS/ FSS under the on-lending system, only that particular credit
12 DBOD-MC on IRAC Norms-2010

facility granted to PACS/ FSS which is in default for a period of two crop seasons in case of short duration crops and one crop season in case of long duration crops, as the case may be, after it has become due will be classified as NPA and not all the credit facilities sanctioned to a PACS/ FSS. The other direct loans & advances, if any, granted by the bank to the member borrower of a PACS/ FSS outside the onlending arrangement will become NPA even if one of the credit facilities granted to the same borrower becomes NPA. 4.2.11 Advances against Term Deposits, NSCs, KVP/IVP, etc Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs and life policies need not be treated as NPAs, provided adequate margin is available in the accounts. Advances against gold ornaments, government securities and all other securities are not covered by this exemption. 4.2.12 Loans with moratorium for payment of interest i. In the case of bank finance given for industrial projects or for agricultural plantations etc. where moratorium is available for payment of interest, payment of interest becomes 'due' only after the moratorium or gestation period is over. Therefore, such amounts of interest do not become overdue and hence do not become NPA, with reference to the date of debit of interest. They become overdue after due date for payment of interest, if uncollected. ii. In the case of housing loan or similar advances granted to staff members where interest is payable after recovery of principal, interest need not be considered as overdue from the first quarter onwards. Such loans/advances should be classified as NPA only when there is a default in repayment of instalment of principal or payment of interest on the respective due dates.

4.2.13 Agricultural advances i. A loan granted for short duration crops will be treated as NPA, if the instalment of principal or interest thereon remains overdue for two crop seasons. A loan granted for long duration crops will be treated as NPA, if the instalment of principal or interest thereon remains overdue for one crop season. For the purpose of these guidelines, “long duration” crops would be crops with crop season longer than one year and crops, which are not “long duration” crops, would be treated as “short duration” crops. The crop season for each crop, which means the period up to harvesting of the crops raised, would be as determined by the State Level Bankers‟ Committee in each State. Depending upon the duration of crops raised by an agriculturist, the above NPA norms would also be made applicable to agricultural term loans availed of by him. The above norms should be made applicable to all direct agricultural advances as listed at items 1.1.1, 1.1.2, 1.1.3, 1.1.4, 1.1.5, 1.1.6 and 1.2.1, 1.2.2 and 1.2.3 of Master Circular on lending to priority sector RPCD.
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No.Plan. BC. 2 /04.09.01/ 2009-2010 dated July 1, 2009. An extract of the list of these items is furnished in the Annex 2. In respect of agricultural loans, other than those specified in the Annex 2 and term loans given to nonagriculturists, identification of NPAs would be done on the same basis as non-agricultural advances, which, at present, is the 90 days delinquency norm. ii. Where natural calamities impair the repaying capacity of agricultural borrowers, banks may decide on their own as a relief measure conversion of the short-term production loan into a term loan or re-schedulement of the repayment period; and the sanctioning of fresh short-term loan, subject to guidelines contained in RBI circular RPCD. No.PLFS.BC.6/ 05.04.02/ 200405 dated July 1, 2005. iii. In such cases of conversion or re-schedulement, the term loan as well as fresh short-term loan may be treated as current dues and need not be classified as NPA. The asset classification of these loans would thereafter be governed by the revised terms & conditions and would be treated as NPA if interest and/or instalment of principal remains overdue for two crop seasons for short duration crops and for one crop season for long duration crops. For the purpose of these guidelines, "long duration" crops would be crops with crop season longer than one year and crops, which are not 'long duration" would be treated as "short duration" crops. iv. The debts as on March 31, 2004 of farmers, who have suffered production and income losses on account of successive natural calamities, i.e., drought, flood, or other calamities which might have occurred in the districts for two or more successive years during the past five years may be rescheduled/ restructured by the banks, provided the State Government concerned has declared such districts as calamity affected. Accordingly, the interest outstanding/accrued in the accounts of such borrowers (crop loans and agriculture term loans) up to March 31, 2004 may be clubbed with the principal outstanding therein as on March 31, 2004, and the amount thus arrived at shall be repayable over a period of five years, at current interest rates, including an initial moratorium of two years. As regards the crop loans and agricultural term loans which have already been restructured on account of natural calamities as per the standing guidelines, only the overdue instalments including interest thereon as on March 31, 2004 may be taken into account for the proposed restructuring. On restructuring as above, the farmers concerned will become eligible for fresh loans. The rescheduled/restructured loans as also the fresh loans to be issued to the farmers may be treated as current dues and need not be classified as NPA. While the fresh loans would be governed by the NPA norms as applicable to agricultural loans, in case of rescheduled/restructured loans, the NPA norms would be applicable from the third year onwards, i.e., on expiry of the initial moratorium period of two years. v. In case of Kharif crop loans in the districts affected by failure of the SouthWest monsoon as notified by the State Government, recovery of any amount either by way of principal or interest during the financial year 2002-03 need not be effected. Further, the principal amount of crop loans in such cases should be converted into term loans and will be recovered over a period of minimum 5 years in case of small and marginal farmers and 4 years in case of other farmers. Interest due in the financial year 2002-03 on crop loans should also be deferred and no interest should be charged on the deferred interest. In such cases of conversion or re-schedulement of crop loans into term loans, the term loans may be treated as current dues and
14 DBOD-MC on IRAC Norms-2010

15. These guidelines will. All these factors. banks should ensure that the interest/instalment payable on such advances are linked to crop cycles. 4. 4. vi.2.14 Government guaranteed advances The credit facilities backed by guarantee of the Central Government though overdue may be treated as NPA only when the Government repudiates its guarantee when invoked. Advances classified as Capital Market exposure. not be applicable to restructuring of advances covered under the paragraph 14.2. the date of completion of the project should be clearly spelt out at the time of financial closure of the project. however.1 of this Master Circular (Advances classified as Commercial Real Estate exposures. While fixing the repayment schedule in case of rural housing advances granted to agriculturists under Indira Awas Yojana and Golden Jubilee Rural Housing Finance Scheme. 2002.2. may lead to delay in project implementation and involve restructuring / reschedulement of loans by banks.1 15 DBOD-MC on IRAC Norms-2010 .15. The asset classification of these loans would thereafter be governed by the revised terms and conditions and would be treated as NPA if interest and / or instalment of principal remain overdue for two crop seasons. the following asset classification norms would apply to the project loans before commencement of commercial operations.15 Projects under implementation For all projects financed by the FIs/ banks after 28th May. and Consumer and Personal Advances) which will 4. The requirement of invocation of guarantee has been delinked for deciding the asset classification and provisioning requirements in respect of State Government guaranteed exposures.need not be classified as NPA. This exemption from classification of Government guaranteed advances as NPA is not for the purpose of recognition of income. which are beyond the control of the promoters. With effect from the year ending 31 March 2006 State Government guaranteed advances and investments in State Government guaranteed securities would attract asset classification and provisioning norms if interest and/or principal or any other amount due to the bank remains overdue for more than 90 days. Accordingly.2 Project Loans There are occasions when the completion of projects is delayed for legal and other extraneous reasons like delays in Government approvals etc. 4.2.

(a) Infrastructure Projects involving court cases Up to another 2 years (beyond the existing extended period of 2 years i.e paragraph 14.1 of the circular. For this purpose.e total extension of 4 years).2.continue to be dealt with in terms of the extant provisions i. in case the reason for extension of date of commencement of production is arbitration proceedings or a court case. (iii) If a project loan classified as 'standard asset' is restructured any time during the period up to two years from the original date of commencement of commercial operations (DCCO). all project loans have been divided into the following two categories : (a) (b) Project Loans for infrastructure sector Project Loans for non-infrastructure sector 'Project Loan' would mean any term loan which has been extended for the purpose of setting up of an economic venture. Banks must fix a Date of Commencement of Commercial Operations (DCCO) for all project loans at the time of sanction of the loan / financial closure (in the case of multiple banking or consortium arrangements).3 (i) Project Loans for Infrastructure Sector A loan for an infrastructure project will be classified as NPA during any time before commencement of commercial operations as per record of recovery (90 days overdue). unless it is restructured and becomes eligible for classification as 'standard asset' in terms of paras (iii) to (v) below. even if it is regular as per record of recovery. and further provided the account continues to be serviced as per the restructured terms. in accordance with the provisions of Part B of this Master Circular. (ii) A loan for an infrastructure project will be classified as NPA if it fails to commence commercial operations within two years from the original DCCO. it can be retained as a standard asset if the fresh DCCO is fixed within the following limits. unless it is restructured and becomes eligible for classification as 'standard asset' in terms of paras (iii) to (v) below. 4. 16 DBOD-MC on IRAC Norms-2010 .15.

(iv) It is re-iterated that the dispensation in para 4. 4. Banks should maintain provisions on such accounts as long as these are classified as standard assets as under : Until two years from the original DCCO 0. unless it is restructured and becomes eligible for classification as 'standard asset' in terms of paras (iii) to (v) below. b.4 (i) Project Loans for Non-Infrastructure Sector A loan for a non-infrastructure project will be classified as NPA during For the purpose of these guidelines. banks should not book income on accrual basis beyond two years from the original DCCO.(b) Infrastructure Projects delayed for other reasons beyond the control of promoters Up to another 1 year (beyond the existing extended period of 2 years i.e. In cases where there is moratorium for payment of interest. 17 DBOD-MC on IRAC Norms-2010 .15.2.00% original DCCO.15. mere extension of DCCO will also be treated as restructuring even if all other terms and conditions remain the any time before commencement of commercial operations as per record of recovery (90 days overdue). considering the high risk involved in such restructured accounts. The other conditions applicable would be : a. (v) same.3 (iii) is subject to adherence to the provisions regarding restructuring of accounts as contained in the Master Circular which would inter alia require that the application for restructuring should be received before the expiry of period of two years from the original DCCO and when the account is still standard as per record of recovery. (ii) A loan for a non-infrastructure project will be classified as NPA if it fails to commence commercial operations within six months from the original DCCO. even if is regular as per record of recovery. in other than court cases. unless it is restructured and becomes eligible for classification as 'standard asset' in terms of paras (iii) to (v) below.40% During the third and the fourth years after the 1. total extension of 3 years).2.

15. mere extension of DCCO will also be treated as restructuring even if all other terms and conditions remain the same. 4. and when the account is still "standard" as per the record of recovery. The other conditions applicable would be : a. banks should not book income on accrual basis beyond six months from the original DCCO. considering the high risk involved in such restructured accounts. Restructuring of project loans after commencement of commercial operations will also be governed by these instructions. provided the fresh DCCO does not extend beyond a period of twelve months from the original DCCO. Asset Classification and Provisioning Pertaining to Advances.(iii) In case of non-infrastructure projects. (ii) Any change in the repayment schedule of a project loan caused due to an increase in the project outlay on account of increase in scope and size of the project. would not be treated as restructuring if : 18 DBOD-MC on IRAC Norms-2010 . banks can prescribe a fresh DCCO. In cases where there is moratorium for payment of interest. This would among others also imply that the restructuring application is received before the expiry of six months from the original DCCO.40% 1.5 (i) Other Issues All other aspects of restructuring of project loans before commencement of commercial operations would be governed by the provisions of Part B of Master Circular on Prudential norms on Income Recognition.00% For this purpose. and retain the "standard" classification by undertaking restructuring of accounts in accordance with the provisions contained in this Master Circular. b. if the delay in commencement of commercial operations extends beyond the period of six months from the date of completion as determined at the time of financial closure.2. Banks should maintain provisions on such accounts as long as these are classified as standard assets as under : Until the first six months from the original DCCO During the next six months (iv) 0.

2. should be fully provided for. are approved by banks from the date of this circular. 4. only on realisation and not if the amount of interest overdue has been funded. In other words. should be done strictly on cash basis. the amount of funded interest is recognised as income. (b) The rise in cost excluding any cost-overrun in respect of the original project is 25% or more of the original outlay. banks which have wrongly recognised income in the past should reverse the interest if it was recognised as income during the current year or make a provision for an equivalent amount if it was recognised as income in the previous year(s). (iii) These guidelines would apply to those cases where the modification to terms of existing loans.6 Income recognition (i) Banks may recognise income on accrual basis in respect of the projects under implementation. if recognised as income. If. (d) On re-rating. which are classified as „standard‟. (ii) Banks should not recognise income on accrual basis in respect of the projects under implementation which are classified as a „substandard‟ asset. 19 DBOD-MC on IRAC Norms-2010 . Banks may recognise income in such accounts only on realisation on cash basis. As regards the regulatory treatment of instrument‟ banks should adopt the following: a) Funded Interest: Income recognition in respect of the NPAs. Consequently. „funded interest‟ recognised as income and „conversion into equity.15. any funding of interest in respect of NPAs. (c) The bank re-assesses the viability of the project before approving the enhancement of scope and fixing a fresh DCCP. however. (if already rated) the new rating is not below the previous rating by more than one notch. as indicated above.(a) The increase in scope and size of the project takes place before commencement of commercial operations of the existing project. debentures or any other regardless of whether these are or are not subjected to restructuring/ rescheduling/ renegotiation of terms of the loan agreement. a provision for an equal amount should also be made simultaneously.

If the amount of interest dues is converted into equity or any other instrument. debentures or any other instrument: The outstanding converted into other instruments would amount normally comprise principal and the interest components.7 Provisioning While there will be no change in the extant norms on provisioning for NPAs. Under this arrangement. On such debentures. banks which are already holding provisions against some of the accounts. 4.b) Conversion into equity. as per the investment valuation norms. not exceeding the amount of interest converted to equity. as on the date of conversion. 4. the institution/the bank financing infrastructure projects will have an arrangement with any financial institution for transferring to the latter the outstanding in respect of such financing in their 20 DBOD-MC on IRAC Norms-2010 . Such provision would be in addition to the amount of provision that may be necessary for the depreciation in the value of the equity or other instruments. in the same asset classification as was applicable to loan just before conversion and provision made as per norms. full provision should be made for the amount of income so recognised to offset the effect of such income recognition. which may now be classified as „standard‟. income should be recognised only on realisation basis.15.2. ab initio. Such equity must thereafter be classified in the “available for sale” category and valued at lower of cost or market value. the equity shares or other instruments arising from conversion of the principal amount of loan would also be subject to the usual prudential valuation norms as applicable to such instruments. Subject to the above. if the conversion of interest is into equity which is quoted. and income is recognised in consequence. interest income can be recognised at market value of equity. However. This norm would also apply to zero coupon bonds or other instruments which seek to defer the liability of the issuer.2. In case of conversion of principal and /or interest in respect of NPAs into debentures.16 Takeout Finance Takeout finance is the product emerging in the context of the funding of long-term infrastructure projects. such debentures should be treated as NPA. The income in respect of unrealised interest which is converted into debentures or any other fixed maturity instrument should be recognised only on redemption of such instrument. shall continue to hold the provisions and shall not reverse the same.

the possibility of a default in the meantime cannot be ruled out.17 Post-shipment Supplier's Credit i. In respect of post-shipment credit extended by the banks covering export of goods to countries for which the ECGC‟s cover is available. EXIM Bank has introduced a guarantee-cum-refinance programme whereby. to the extent payment has been received from the EXIM Bank. ii.2. The norms of asset classification will have to be followed by the concerned bank/financial institution in whose books the account stands as balance sheet item as on the relevant date. the taking over institution. 4. UN embargo. in the event of default.18 Export Project Finance i. In respect of export project finance. the corresponding provisions could be reversed. Accordingly. there could be instances where the actual importer has paid the dues to the bank abroad but the bank in turn is unable to remit the amount due to political developments such as war. 4. However. should make provisions treating the account as NPA from the actual date of it becoming NPA even though the account was not in its books as on that date. In such cases. ii.books on a predetermined basis.2. The lending institution should also make provisions against any asset turning into NPA pending its take over by taking over institution. the advance may not be treated as a nonperforming asset for asset classification and provisioning purposes. EXIM Bank will pay the guaranteed amount to the bank within a period of 30 days from the day the bank invokes the guarantee after the exporter has filed claim with ECGC. but the importer's country is not allowing the funds to be remitted due to political or other reasons. where the lending bank is able to establish through documentary evidence that the importer has cleared the dues in full by depositing the amount in the bank abroad before it turned into NPA in the books of the bank. As and when the asset is taken over by the taking over institution. on taking over such assets. the asset classification may be 21 DBOD-MC on IRAC Norms-2010 . The lending institution should not recognise income on accrual basis and account for the same only when it is paid by the borrower/ taking over institution (if the arrangement so provides). it should be classified accordingly. strife. In view of the time-lag involved in taking-over. If the lending institution observes that the asset has turned NPA on the basis of the record of recovery. etc.

4. in respect of additional facilities sanctioned under the rehabilitation packages.1. its recognition as such. provisions should be made on the nonperforming assets on the basis of classification of assets into prescribed categories as detailed in paragraphs 4 supra. The assessment made by the inspecting officer of the RBI is furnished to the bank to assist the bank management and the statutory auditors in taking a decision in regard to making adequate and necessary provisions in terms of prudential guidelines.made after a period of one year from the date the amount was deposited by the importer in the bank abroad.1 The primary responsibility for making adequate provisions for any diminution in the value of loan assets. the Income Recognition.2 In conformity with the prudential norms.1 PROVISIONING NORMS General 5.19 Advances under rehabilitation approved by BIFR/ TLI Banks are not permitted to upgrade the classification of any advance in respect of which the terms have been renegotiated unless the package of renegotiated terms has worked satisfactorily for a period of one year.2. investment or other assets is that of the bank managements and the statutory auditors. 22 DBOD-MC on IRAC Norms-2010 . Asset Classification norms will become applicable after a period of one year from the date of disbursement. If loss assets are permitted to remain in the books for any reason. Taking into account the time lag between an account becoming doubtful of recovery. 5.2 Loss assets Loss assets should be written off. 100 percent of the outstanding should be provided for.1. 5 5. the realisation of the security and the erosion over time in the value of security charged to the bank. While the existing credit facilities sanctioned to a unit under rehabilitation packages approved by BIFR/term lending institutions will continue to be classified as substandard or doubtful as the case may be. doubtful assets and loss assets as below: 5. the banks should make provision against substandard assets.

in view of certain safeguards such as escrow accounts available in respect of infrastructure lending. ab-initio. In regard to the secured portion. as assessed by the bank/approved valuers/Reserve Bank‟s inspecting officers. 5.e. i. is not more than 10 percent. To avail of this benefit of lower provisioning. Unsecured exposure is defined as an exposure where the realisable value of the security. Collaterals such as immovable properties charged in favour of the bank should be got valued once in three years by valuers appointed as per the guidelines approved by the Board of Directors. at the rates ranging from 20 percent to 100 percent of the secured portion depending upon the period for which the asset has remained doubtful: Period for which the advance has remained in „doubtful‟ category Up to one year One to three years More than three years Provision requirement (%) 20 30 100 Note: Valuation of Security for provisioning purposes With a view to bringing down divergence arising out of difference in assessment of the value of security. „Exposure‟ shall include all funded and non-funded exposures (including underwriting and similar commitments). „Security‟ will mean tangible security properly discharged to the bank and will not include intangible securities like guarantees (including State government guarantees). of the outstanding exposure. comfort letters etc. ii. a total of 20 per cent on the outstanding balance. 5 crore and above stock audit at annual intervals by external agencies appointed as per the guidelines approved by the Board would be mandatory in order to enhance the reliability on stock valuation.5. in cases of NPAs with balance of Rs. 100 percent of the extent to which the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis. the banks should have in place an appropriate mechanism to escrow the cash flows and also have a clear and legal first claim on these cash flows.. The provisioning requirement for unsecured „doubtful‟ assets is 100 per cent. However.3 Doubtful assets i.4 (i) Substandard assets A general provision of 10 percent on total outstanding should be made without making any allowance for ECGC guarantee cover and securities available. 23 DBOD-MC on IRAC Norms-2010 . (ii) The „unsecured exposures‟ which are identified as „substandard‟ would attract additional provision of 10 per cent. infrastructure loan accounts which are classified as sub-standard will attract a provisioning of 15 per cent instead of the aforesaid prescription of 20 per cent. provision may be made on the following basis.

banks may treat annuities under build-operate-transfer (BOT) model in respect of road / highway projects and toll collection rights. This would differentiate such loans from other entirely unsecured loans. these should be duly provided for. with effect from November 5.40 per cent (ii) The revised norms would be effective prospectively but the provisions held at present should not be reversed. If 24 DBOD-MC on IRAC Norms-2010 . as tangible securities subject to the condition that banks' right to receive annuities and toll collection rights is legally enforceable and irrevocable. (iii) While the provisions on individual portfolios are required to be calculated at the rates applicable to them.00 per cent. any provisions are required over and above the level of provisions currently held for the standard category assets. it is advised that the following would be applicable from the financial year 2009-10 onwards : a) For determining the amount of unsecured advances for reflecting in schedule 9 of the published balance sheet. 5. However. etc. 2009. b) Banks should also disclose the total amount of advances for which intangible securities such as charge over the rights. the excess or shortfall in the provisioning. vis-a-vis the position as on any previous date. all other loans and advances not included in (a) and (b) above at 0. has been taken as also the estimated value of such intangible collateral.25 per cent. Banks should make general provision for standard assets at the following rates for the funded outstanding on global loan portfolio basis: (a) (b) (c) direct advances to agricultural and SME sectors at 0. if by applying the revised provisioning norms. licenses. authority. should not be reckoned as tangible security. b) However. The disclosure may be made under a separate head in "Notes to Accounts".(iii) In order to enhance transparency and ensure correct reflection of the unsecured advances in Schedule 9 of the banks' balance sheet. advances to Commercial Real Estate (CRE) Sector at 1.. should be determined on an aggregate basis. authorisations. etc. where there are provisions to compensate the project sponsor if a certain level of traffic is not achieved. charged to the banks as collateral in respect of projects (including infrastructure projects) financed by them. Hence such advances shall be reckoned as unsecured. the rights. licenses. in future.5 Standard assets (i) The provisioning requirements for all types of standard assets stands amended as below.

there can be situations where bank is put unexpectedly to loss due to events such as civil unrest or collapse of currency in a country. The floating provisions can be used only for contingencies under extraordinary circumstances for making specific provisions in impaired accounts after obtaining board‟s approval and with prior permission of RBI. Market category would include events such as 25 DBOD-MC on IRAC Norms-2010 . the provisions rendered surplus should not be reversed to P&L and should continue to be maintained at the existing level. 2009 are less than the provisions already held. Market and Credit. General. The bank should hold floating provisions for „advances‟ and „investments‟ separately and the guidelines prescribed will be applicable to floating provisions held for both „advances‟ & „investment‟ portfolios.2 i Principle for utilisation of floating provisions by banks The floating provisions should not be used for making specific provisions as per the extant prudential guidelines in respect of nonperforming assets or for making regulatory provisions for standard assets. The boards of the banks should lay down an approved policy as to what circumstances would be considered extraordinary. (iv) The provisions on standard assets should not be reckoned for arriving at net NPAs. ii To facilitate banks' boards to evolve suitable policies in this regard. Under general category.6. (v) The provisions towards Standard Assets need not be netted from gross advances but shown separately as 'Contingent Provisions against Standard Assets' under 'Other Liabilities and Provisions Others' in Schedule 5 of the balance sheet.the provisions on an aggregate basis required to be held with effect from November 5.6. 5. These extra-ordinary circumstances could broadly fall under three categories viz. the balance should be provided for by debit to P&L.1 Principle for creation of floating provisions by banks The bank's board of directors should lay down approved policy regarding the level to which the floating provisions can be created. 5. In case of shortfall determined on aggregate basis.6 Prudential norms on creation and utilisation of floating provisions 5. it is clarified that the extra-ordinary circumstances refer to losses which do not arise in the normal course of business and are exceptional and non-recurring in nature. Natural calamities and pandemics may also be included in the general category.

only to the extent of meeting the interest / charges referred to above. as a one time measure.a general melt down in the markets. etc.7 Additional Provisions for NPAs at higher than prescribed rates The regulatory norms for provisioning represent the minimum requirement. Such additional provisions are not to be considered as floating provisions. nor recover from the farmer.6. to provide for estimated actual loss in collectible amount. they can be treated as part of Tier II capital within the overall ceiling of 1. to utilise. Among the credit category. legal charges. unapplied interest. banks are allowed. 5. Alternatively. which affects the entire financial system. 5.4 Disclosures Banks should make comprehensive disclosures on floating provisions in the “notes on accounts” to the balance sheet on (a) opening balance in the floating provisions account. interest in excess of the principal amount.6. like the minimum regulatory provision on NPAs. the Floating Provisions held for 'advances' portfolio. 2008. They can only be utilised for making specific provisions in extraordinary circumstances as mentioned above.3 Accounting Floating provisions cannot be reversed by credit to the profit and loss account. these provisions can be netted off from gross NPAs to arrive at disclosure of net NPAs. inspection charges and miscellaneous charges. bank may voluntarily make specific provisions for advances at rates which A are higher than the rates prescribed under existing regulations. may be netted off from 26 DBOD-MC on IRAC Norms-2010 . provided such higher rates are approved by the Board of Directors and consistently adopted from year to year. only exceptional credit losses would be considered as an extra-ordinary circumstance.25 % of total risk weighted assets. (c) purpose and amount of draw down made during the accounting year. lending institutions shall neither claim from the Central Government. penal interest. iii In terms of the Agricultural Debt Waiver and Debt Relief Scheme. (b) the quantum of floating provisions made in the accounting year. In view of the extraordinary circumstances in which the banks are required to bear such interest / charges. 5. Until such utilisation. at their discretion. All such interest / charges will be borne by the lending institutions. The additional provisions for NPAs. and (d) closing balance in the floating provisions account.

gross NPAs to arrive at the net NPAs included in the general category. Market category would include events such as 25 DBOD-MC on IRAC Norms-2010 .

5.8

Provisions on Leased Assets i) Substandard assets a) 10 percent of the sum of the net investment in the lease and the

unrealised portion of finance income net of finance charge component. The terms „net investment in the lease‟, „finance income‟ and „finance charge‟ are as defined in „AS 19 Leases‟ issued by the ICAI. b) Unsecured lease exposures, as defined in paragraph 5.4 above,

which are identified as „substandard‟ would attract additional provision of 10 per cent, i.e., a total of 20 per cent.

ii)

Doubtful assets

100 percent of the extent to which, the finance is not secured by the realisable value of the leased asset. Realisable value is to be estimated on a realistic basis. In addition to the above provision, provision at the following rates should be made on the sum of the net investment in the lease and the unrealised portion of finance income net of finance charge component of the secured portion, depending upon the period for which asset has been doubtful:

Period for which the advance has remained in „doubtful‟ category Up to one year One to three years More than three years iii) Loss assets

Provision requirement (%) 20 30 100

The entire asset should be written off. If for any reason, an asset is allowed to remain in books, 100 percent of the sum of the net investment in the lease and the unrealised portion of finance income net of finance charge component should be provided for. 5.9 Guidelines for Provisions under Special Circumstances 5.9.1 Advances granted under rehabilitation packages approved by BIFR/term

lending institutions (i) In respect of advances under rehabilitation package approved by BIFR/term lending institutions, the provision should continue to be made in respect of dues to the bank on the existing credit facilities as per their classification as substandard or doubtful asset.

28

DBOD-MC on IRAC Norms-2010

finalised by BIFR and/or term lending institutions, provision on additional facilities sanctioned need not be made for a period of one year from the date of disbursement. (iii) In respect of additional credit facilities granted to SSI units which are identified as sick [as defined in Section IV (Para 2.8) of RPCD circular RPCD.PLNFS.BC. No 83 /06.02.31/20042005 dated 1 March 2005] and where rehabilitation packages/nursing programmes have been drawn by the banks themselves or under consortium arrangements, no provision need be made for a period of one year.

5.9.2

Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs,

gold ornaments, government & other securities and life insurance policies would attract provisioning requirements as applicable to their asset classification status. 5.9.3 Treatment of interest suspense account

Amounts held in Interest Suspense Account should not be reckoned as part of provisions. Amounts lying in the Interest Suspense Account should be deducted from the relative advances and thereafter, provisioning as per the norms, should be made on the balances after such deduction. 5.9.4 Advances covered by ECGC guarantee

In the case of advances classified as doubtful and guaranteed by ECGC, provision should be made only for the balance in excess of the amount guaranteed by the Corporation. Further, while arriving at the provision required to be made for doubtful assets, realisable value of the securities should first be deducted from the outstanding balance in respect of the amount guaranteed by the Corporation and then provision made as illustrated hereunder:

Example

Outstanding Balance ECGC Cover Period for which the advance has remained doubtful Value of security held (excludes worth of Rs.)

Rs. 4 lakhs 50 percent More than 3 years remained doubtful (as on March 31, 2004) Rs. 1.50 lakhs

(ii)

As regards the

additional
27

facilities sanctioned

as per

package

DBOD-MC on IRAC Norms-2010

25 lakhs Rs.50 lakh Rs. 6.50 lakh Rs.02 lakh 29 DBOD-MC on IRAC Norms-2010 .50 lakh Rs.90 lakh (@ 60%) Rs. 2.25 lakhs (@ 100 percent of unsecured portion) Rs. 2.38 lakh Rs. 1. 8.10. 0. 4.5 Advance covered by CGTSI guarantee In case the advance covered by CGTSI guarantee becomes nonperforming.12 lakh (100%) Rs.18. 1. 2005) 5.12 lakh Rs.12 lakh Provision Required (as on March 31. 2. The amount outstanding in excess of the guaranteed portion should be provided for as per the extant guidelines on provisioning for nonperforming advances.Provision required to be made Outstanding balance Less: Value of security held Unrealised balance Less: ECGC Cover (50% of unrealisable balance) Net unsecured balance Provision for unsecured portion of advance Provision for secured portion of advance (as on March 31. 2004) 75% of the amount outstanding or 75% of the unsecured amount or Rs.2.50 lakhs Rs.1. 2005) Total provision to be made Rs.2. 2005) Secured portion Unsecured & uncovered portion Total provision required Rs.0. Two illustrative examples are given below: Example I Asset classification status: CGTSI Cover Realisable value of Security Balance outstanding Less Realisable value of security Unsecured amount Less CGTSI cover (75%) Net unsecured and uncovered portion: Doubtful – More than 3 years (as on March 31.25 lakhs Rs.75 lakh.00 lakh Rs.50 lakh Rs.50 lakhs Rs.1.90 lakhs (@ 60 per cent of the secured portion) Rs.15 lakhs (as on March 31. 1.00 lakhs Rs. 1.9. no provision need be made towards the guaranteed portion. 3. whichever is the least Rs. 1.

11. the corresponding provisions could be reversed. 30.25 lakh Rs.00 lakh Rs.18. 11. the following procedure may be adopted: ¾ The loss on revaluation of assets has to be booked in the bank's Profit & Loss Account. banks should treat the full amount of the Revaluation Gain relating to 30 DBOD-MC on IRAC Norms-2010 . As and when the asset is taken-over by the taking-over institution. the outstanding amount of foreign currency denominated loans (where actual disbursement was made in Indian Rupee) which becomes overdue.00 lakh Rs. with its attendant implications of provisioning requirements. 2005) Secured portion Unsecured & uncovered portion Total provision required Rs.6 Takeout finance The lending institution should make provisions against a 'takeout finance' turning into NPA pending its takeover by the taking-over institution. 18.10.25 lakh (100%) Rs. whichever is the least Rs. Such assets should not normally be revalued. 2005) CGTSI Cover Realisable value of Security Balance outstanding Less Realisable value of security Unsecured amount Less CGTSI cover (75%) Net unsecured and uncovered portion: 75% of the amount outstanding or 75% of the unsecured amount or Rs.9. 5.25 lakh 5.11. 21. ¾ Besides the provisioning requirement as per Asset Classification.10.7 Reserve for Exchange Rate Fluctuations Account (RERFA) When exchange rate movements of Indian rupee turn adverse.25 lakh Provision Required (as on March 31.40. goes up correspondingly. 10.75 lakh.Example II Asset classification status Doubtful – More than 3 years (as on March 31.9.00 lakh Rs.00 lakh Rs.00 lakh Rs.00 lakh (@ 100%) Rs. 10.75 lakh Rs. In case such assets need to be revalued as per requirement of accounting practices or for any other requirement.

8 Provisioning for country risk Banks shall make provisions. if any.25 5 20 25 100 100 Risk category Insignificant Low Moderate High Very high Restricted Offcredit ECGC Classification A1 A2 B1 B2 C1 C2 D Banks are required to make provision for country risk in respect of a country where its net funded exposure is one per cent or more of its total assets. on account of Foreign Exchange Fluctuation as provision against the particular assets. their exposures to India will be excluded. 5.25 to 100 percent according to the risk categories mentioned below.9. may not exceed 100% of the outstanding. The provision for country risk shall be in addition to the provisions required to be held according to the asset classification status of the asset.25 0. Foreign banks shall compute the country exposures of their Indian branches and shall hold appropriate provisions in their Indian books. including provision held for country risk. provision held. with effect from the year ending 31 March 2003. The exposures of foreign branches of Indian banks to the host country should be included. banks shall make provisions as per the following schedule: Provisioning Requirement (per cent) 0.e. Banks may make a lower level of provisioning (say 25% of the requirement) in respect of short-term exposures (i. However. exposure to India. on the net funded country exposures on a graded scale ranging from 0. Banks may not make any provision for „home country‟ exposures i. To begin with.the corresponding assets.e. exposures with contractual maturity of less than 180 days). 31 DBOD-MC on IRAC Norms-2010 . In the case of „loss assets‟ and „doubtful assets‟.

6/21.No.9.1.C of Master Circular DBOD.9.10 Provisions for Diminution of Fair Value Provisions for diminution of fair value of restructured advances.9.01.002/2009-10 dated July 1. 2009 on Prudential Norms on Capital adequacy .No.BP.2 of Master Circular DBOD. 5.BC. in respect of securitisation transactions undertaken in terms of our guidelines on securitisation dated February 1.06.1.BC. both in respect of Standard Assets as well as NPAs. All conditions applicable for treatment of the provisions for standard assets would also apply to the aforesaid provisions for derivative and gold exposures. 2006. Accordingly.001/2009-10 dated February 8.Basel I Framework.9 Excess Provisions on sale of Standard Asset / NPAs (a) If the sale is in respect of Standard Asset and the sale consideration is higher than the book value.73/21.25% of total Risk Weighted Assets. 2010 on Prudential guidelines on Capital Adequacy and Market Discipline .BP. should be fully provided for. of the concerned counterparties.12 Provisioning requirements for derivative exposures Credit exposures computed as per the current marked to market value of the contract. arising on account of the interest rate & foreign exchange derivative transactions.5. 5. (b) Excess provisions which arise on sale of NPAs can be admitted as Tier II capital subject to the overall ceiling of 1.New Capital Adequacy Framework (NCAF) and paragraph 2. shall also attract provisioning requirement as applicable to the loan assets in the 'standard' category. made on account of reduction in rate of interest and / or reschedulement of principal amount are permitted to be netted from the relative asset.3.2.11 Provisioning transactions norms for Liquidity facility provided for Securitisation The amount of liquidity facility drawn and outstanding for more than 90 days.9. the excess provisions may be credited to Profit and Loss Account. 5. and gold. these excess provisions that arise on sale of NPAs would be eligible for Tier II status in terms of paragraph 4. 32 DBOD-MC on IRAC Norms-2010 .

because the rates of provisioning stipulated for NPAs are the regulatory minimum. iv Banks should achieve this norm not later than end-September 2010.5. ii Currently there is a realisation from a macro-prudential perspective that banks should build up provisioning and capital buffers in good times i. is not less than 70 per cent. This will enhance the soundness of individual banks. iii Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to gross non-performing assets and indicates the extent of funds a bank has kept aside to cover loan losses. and ensure that their total provisioning coverage ratio. the provisioning requirements for NPAs range between 10 per cent and 100 per cent of the outstanding amount.e. which can be used for absorbing losses in a downturn. Banks can also make additional specific provisions subject to a consistent policy based on riskiness of their credit portfolios. It has been observed that there is a wide heterogeneity and variance in the level of provisioning coverage ratio across different banks. With this in view. when the profits are good.10 Provisioning Coverage Ratio i At present. Banks are advised to compute the PCR as per the format given in Annex – 3. 33 DBOD-MC on IRAC Norms-2010 . It has therefore been decided that banks should augment their provisioning cushions consisting of specific provisions against NPAs as well as floating provisions. depending on the age of the NPAs and the security available. there is a need for improving the provisioning cover as the banking system is currently making good profits. Also. as also the stability of the financial sector. including floating provisions. the PCR should be disclosed in the Notes to Accounts to the Balance Sheet.

2002) and related issues 6. and A Standard Asset where: (a) (b) the asset is under consortium/ multiple banking arrangements. Guidelines on sale of financial assets to Securitisation Company (SC)/ Reconstruction Company (RC) (created under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. by banks/ FIs.3 below. The prudential guidelines have been grouped under the following headings: i) ii) Financial assets which can be sold.3 Disclosure requirements Financial assets which can be sold A financial asset may be sold to the SC/RC by any bank/ FI where the asset is: i) ii) A NPA.6. iii) Prudential norms. for banks/ FIs for sale of their financial assets to SC/ RC and for investing in bonds/ debentures/ security receipts and any other securities offered by the SC/RC as compensation consequent upon sale of financial assets: a) b) c) Provisioning / Valuation norms Capital adequacy norms Exposure norms iv) 6.2 Structure The guidelines to be followed by banks/ FIs while selling their financial assets to SC/RC under the Act ibid and investing in bonds/ debentures/ security receipts offered by the SC/RC are given below. at least 75% by value of the asset is classified as nonperforming asset in the books of other banks/FIs. 2002. and 34 DBOD-MC on IRAC Norms-2010 .1 Scope These guidelines would be applicable to sale of financial assets enumerated in paragraph 6. in the following areas. for asset reconstruction/ securitisation under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. including a non-performing bond/ debenture. 6. Procedure for sale of banks‟/ FIs‟ including valuation and pricing aspects. financial assets to SC/ RC.

if 75% (by value) of the banks / FIs decide to accept the offer. Delegation of powers of various functionaries for taking decision on the sale of the financial assets. however. In the case of consortium / multiple banking arrangements. (c) Banks/ FIs should ensure that subsequent to sale of the financial assets to SC/RC. ii. i. 2002 (SARFAESI Act) allows acquisition of financial assets by SC/RC from any bank/ FI on such terms and conditions as may be agreed upon between them. (d) (i) Each bank / FI will make its own assessment of the value offered by the SC / RC for the financial asset and decide whether to accept or reject the offer. directed to ensure that the effect of the sale of the financial assets should be such that the asset is taken off the books of the bank/ FI and after the sale there should not be any known liability devolving on the banks/ FIs. Financial assets to be sold. they do not assume any operational. including valuation and pricing aspects (a) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act... as well as on „with recourse‟ basis.e. Procedure for sale of banks‟/ FIs‟ SC/ RC. the remaining banks / FIs will be obligated to accept the offer. (b) Banks/ FIs. legal or any other type of risks relating to the financial assets sold.4. etc. with the entire credit risk associated with the financial assets being transferred to SC/ RC. Valuation procedure to be followed to ensure that the realisable value of financial assets is reasonably estimated. i. inter alia. (ii) 35 DBOD-MC on IRAC Norms-2010 . iv. The Board shall lay down policies and guidelines covering.e. iii. Norms and procedure for sale of such financial assets. i.(c) at least 75% (by value) of the banks / FIs who are under the consortium / multiple banking arrangements agree to the sale of the asset to SC/RC. subject to unrealized part of the asset reverting to the seller bank/ FI. which propose to sell to SC/RC their financial assets should ensure that the sale is conducted in a prudent manner in accordance with a policy approved by the Board. Banks/ FIs are. This provides for sale of the financial assets on „without recourse‟ basis. financial assets to 6.

5. and ¾ the NBV of the financial asset. In such cases the terms of sale should provide for a report from the SC/RC to the bank/ FI on the value realised from the asset. the excess provision will not be reversed but will be utilized to meet the shortfall/ loss on account of sale of other financial assets to SC/RC. or other bonds/ debentures issued by SC/RC.e. These securities will also be classified as investments in the books of banks/ FIs. Prudential norms for banks/ FIs for the sale transactions (A) (a) Provisioning/ valuation norms (i) When a bank / FI sells its financial assets to SC/ RC. the sale shall be recognised in books of the banks / FIs at the lower of: ¾ the redemption value of the security receipts/ pass-through certificates.(iii) Under no circumstances can a transfer to the SC/ RC be made at a contingent price whereby in the event of shortfall in the realization by the SC/RC. (h) In cases of specific financial assets. on transfer the same will be removed from its books. (ii) (iii) (iv) 36 DBOD-MC on IRAC Norms-2010 . When banks/ FIs invest in the security receipts/ pass-through certificates issued by SC/RC in respect of the financial assets sold by them to the SC/RC. (f) Bonds/ debentures received by banks/ FIs as sale consideration towards sale of financial assets to SC/RC will be classified as investments in the books of banks/ FIs. If the sale to SC/ RC is at a price below the net book value (NBV) (i. in an agreed proportion. banks/ FIs may enter into agreement with SC/RC to share. (e) Banks/ FIs may receive cash or bonds or debentures as sale consideration for the financial assets sold to SC/RC. No credit for the expected profit will be taken by banks/ FIs until the profit materializes on actual sale.. the banks/ FIs would have to bear a part of the shortfall. the shortfall should be debited to the profit and loss account of that year. where it is considered necessary. book value less provisions held). 6. Pass-through certificates (PTC). If the sale is for a value higher than the NBV. any surplus realised by SC/RC on the eventual realisation of the concerned asset. (g) Banks may also invest in security receipts.

obtained from SC/RC from time to time. notice of transfer should be issued to the SC/ RC. However. 37 DBOD-MC on IRAC Norms-2010 . for valuation of such investments.5% above the Bank Rate in force at the time of issue. banks‟/ FIs‟ exposure on SC/RC through their investments in debentures/ bonds/security receipts/PTCs issued by the SC/ RC may go beyond their prudential exposure ceiling. if any of the above instruments issued by SC/RC is limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme the bank/ FI shall reckon the Net Asset Value (NAV). (B) Exposure Norms Banks‟/ FIs‟ investments in debentures/ bonds/ security receipts/PTCs issued by a SC/RC will constitute exposure on the SC/RC. The securities must be secured by an appropriate charge on the assets transferred. the loss or gain must be dealt with in the same manner as at (ii) and (iii) above. bonds/ security receipts/ Pass-through (iii) (iv) (v). classification and other norms applicable to investment in non-SLR instruments prescribed by RBI from time to time would be applicable to bank‟s/ FI‟s investment in debentures/ bonds/ security receipts/PTCs issued by SC/ RC. The securities must carry a rate of interest which is not lower than 1. in the initial years. banks/ FIs will be allowed.The above investment should be carried in the books of the bank / FI at the price as determined above until its sale or realization. and on such sale or realization. As only a few SC/RC are being set up now. the valuation. (vi) (c) Investment in debentures/ certificates issued by SC/ RC All instruments received by banks/FIs from SC/RC as sale consideration for financial assets sold to them and also other instruments issued by SC/ RC in which banks/ FIs invest will be in the nature of non SLR securities. to exceed prudential exposure ceiling on a case-to-case basis. In view of the extra ordinary nature of event. The securities must provide for part or full prepayment in the event the SC / RC sells the asset securing the security before the maturity date of the security. Accordingly. The commitment of the SC / RC to redeem the securities must be unconditional and not linked to the realization of the assets. (b) The securities (bonds and debentures) offered by SC / RC should satisfy the following conditions: (i) (ii) The securities must not have a term in excess of six years. Whenever the security is transferred to any other party.

Related Issues (a) SC/ RC will also take over financial assets which cannot be revived and which. where securitisation companies and reconstruction companies are not involved.7. No.6. Normally the SC/ RC will not take over these assets but act as an agent for recovery for which it will charge a fee. 6. the assets will not be removed from the books of the bank/ FI but realisations as and when received will be credited to the asset account. (b) 7. Since the sale/purchase of nonperforming financial assets under this option would be conducted within the financial system the whole process of resolving the non performing assets and matters related thereto has to be initiated with due diligence and care warranting the existence of a set of clear guidelines which shall be complied with by all entities so that the process of resolving nonperforming assets by sale and purchase of NPAs proceeds on smooth and sound lines.Performing Financial Assets In order to increase the options available to banks for resolving their non performing assets and to develop a healthy secondary market for nonperforming assets. d. therefore. Accordingly guidelines on sale/purchase of nonperforming assets have been formulated and furnished below.6. guidelines have been issued to banks on purchase / sale of NonPerforming Assets. 38 DBOD-MC on IRAC Norms-2010 . e. shall be required to make the following disclosures in the Notes on Accounts to their Balance sheets: Details of financial assets sold during the year to SC/RC for Asset Reconstruction a. which sell their financial assets to an SC/ RC. Provisioning for the asset will continue to be made by the bank / FI in the normal course. c. Guidelines on purchase/ sale of Non . Where the assets fall in the above category. Disclosure Requirements Banks/ FIs. of accounts Aggregate value (net of provisions) of accounts sold to SC / RC Aggregate consideration Additional consideration realized in respect of accounts transferred in earlier years Aggregate gain / loss over net book value. b. will have to be disposed of on a realisation basis. The guidelines may be placed before the bank's /FI's /NBFC's Board and appropriate steps may be taken for their implementation.

Scope 7. inter alia. including valuation and pricing aspects i) A bank which is purchasing/ selling nonperforming financial assets should ensure that the purchase/ sale is conducted in accordance with a policy approved by the Board. Prudential norms. 7. for banks for purchase/ sale of non performing financial assets: a) b) c) d) e) iii) 7.5 Asset classification norms Provisioning norms Accounting of recoveries Capital adequacy norms Exposure norms Disclosure requirements Procedure for purchase/ sale of non performing financial assets. would be eligible for purchase/sale in terms of these guidelines if it is a nonperforming asset/non performing investment in the books of the selling bank. The guidelines have been grouped under the following headings: i) ii) Procedure for purchase/ sale of non performing financial assets by banks. a) b) c) Non performing financial assets that may be purchased/ sold. Valuation procedure to be followed to ensure that the economic value of financial assets is reasonably estimated based on the estimated cash flows arising out of repayments and recovery prospects. Structure 7. including assets under multiple/consortium banking arrangements. in the following areas. The Board shall lay down policies and guidelines covering.1 These guidelines would be applicable to banks. including valuation and pricing aspects.2 A financial asset. Norms and procedure for purchase/ sale of such financial assets. from/ to other banks/FIs/NBFCs (excluding securitisation companies/ reconstruction companies). FIs and NBFCs purchasing/ selling non performing financial assets. 7.3 The reference to „bank‟ in the guidelines on purchase/sale of nonperforming financial assets would include financial institutions and NBFCs.4 The guidelines to be followed by banks purchasing/ selling nonperforming financial assets from / to other banks are given below. Delegation of powers of various functionaries for taking decision on 39 DBOD-MC on IRAC Norms-2010 d) .

e) ii) Accounting policy While laying down the policy. they do not have any involvement with reference to assets sold and do not assume operational. (Same principle should be used in compromise settlements.) iv) The estimated cash flows are normally expected to be realised within a period of three years and at least 10% of the estimated cash flows should be realized in the first year and at least 5% in each half year thereafter. Selling bank shall ensure that the effect of the sale of the financial assets should be such that the asset is taken off the books of the bank and after the sale there should not be any known liability devolving on the selling bank.the purchase/ sale of the financial assets. subject to full recovery within three years. vi) Banks should ensure that subsequent to sale of the non performing financial assets to other banks. the specific financial asset should not enjoy the support of credit enhancements / liquidity facilities in any form or manner. v) A bank may purchase/sell nonperforming financial assets from/to other banks only on „without recourse‟ basis. the net present value of the settlement amount should be calculated and this amount should generally not be less than the net present value of the realisable value of securities. work out the net present value of the estimated cash flows associated with the realisable value of the available securities net of the cost of realisation. Consequently. 40 DBOD-MC on IRAC Norms-2010 Each bank will make its own assessment of the value offered by the purchasing bank for the financial asset and decide whether to accept or reject the . the Board shall satisfy itself that the bank has adequate skills to purchase non performing financial assets and deal with them in an efficient manner which will result in value addition to the bank. The sale price should generally not be lower than the net present value arrived at in the manner described above. etc. legal or any other type of risks relating to the financial assets sold. while selling NPAs. iii) Banks should. The Board should also ensure that appropriate systems and procedures are in place to effectively address the risks that a purchasing bank would assume while engaging in this activity. vii) offer. i.e.. the entire credit risk associated with the nonperforming financial assets should be transferred to the purchasing bank. As the payment of the compromise amount may be in instalments.

may be classified as „standard‟ in the books of the purchasing bank for a period of 90 days from the date of purchase. 41 DBOD-MC on IRAC Norms-2010 . the selling banks would have to bear a part of the shortfall. ix) A nonperforming asset in the books of a bank shall be eligible for sale to other banks only if it has remained a nonperforming asset for at least two years in the books of the selling bank. (xii) Banks are also permitted to sell/buy homogeneous pool within retail non- performing financial assets.5 (iv). on a portfolio basis provided each of the nonperforming financial assets of the pool has remained as nonperforming financial asset for at least 2 years in the books of the selling bank. xiii) The selling bank shall pursue the staff accountability aspects as per the existing instructions in respect of the nonperforming assets sold to other banks. which had sold the NPFA. Prudential norms for banks for the purchase/ sale transactions (A) (i) Asset classification norms The nonperforming financial asset purchased. Thereafter. xi) A nonperforming financial asset should be held by the purchasing bank in its books at least for a period of 15 months before it is sold to other banks. shall be determined by the record of recovery in the books of the purchasing bank with reference to cash flows estimated while purchasing the asset which should be in compliance with requirements in Para 7. 7. Banks should not sell such assets back to the bank. The pool of assets would be treated as a single asset in the books of the purchasing bank.viii) Under no circumstances can a sale to other banks be made at a contingent price whereby in the event of shortfall in the realization by the purchasing banks. the asset classification status of the financial asset purchased. (ii) The asset classification status of an existing exposure (other than purchased financial asset) to the same obligor in the books of the purchasing bank will continue to be governed by the record of recovery of that exposure and hence may be different.6. x) Banks shall sell nonperforming financial assets to other banks only on cash basis. The entire sale consideration should be received upfront and the asset can be taken out of the books of the selling bank only on receipt of the entire sale consideration.

iii) If the sale is for a value higher than the NBV. Recoveries in excess of the acquisition cost can be recognised as profit. (C) Accounting of recoveries Any recovery in respect of a nonperforming asset purchased from other banks should first be adjusted against its acquisition cost. banks should assign 100% risk weights to the nonperforming financial assets purchased from other banks. the shortfall should be debited to the profit and loss account of that be reversed but will be utilised to meet the shortfall/ loss on account of sale of other nonperforming financial assets. Books of purchasing bank The asset shall attract provisioning requirement appropriate to its asset classification status in the books of the purchasing bank. ii) year. the excess provision shall not If the sale is at a price below the net book value (NBV) (i. book value less provisions held). In case the nonperforming asset purchased is an investment. then it would attract capital charge for market risks also. the asset classification status will continue to be determined with reference to the date of NPA in the selling bank.. For NBFCs the relevant instructions on capital adequacy would be 42 DBOD-MC on IRAC Norms-2010 . (B) Provisioning norms Books of selling bank i) When a bank sells its nonperforming financial assets to other banks.e. (D) Capital Adequacy For the purpose of capital adequacy. Thereafter. the same will be removed from its books on transfer. (iv) Any restructure/reschedule/rephrase of the repayment schedule or the estimated cash flow of the nonperforming financial asset by the purchasing bank shall render the account as a nonperforming asset.(iii) Where the purchase/sale does not satisfy any of the prudential requirements prescribed in these guidelines the asset classification status of the financial asset in the books of the purchasing bank at the time of purchase shall be the same as in the books of the selling bank.

For NBFCs the relevant instructions on exposure norms would be applicable. No. Disclosure Requirements Banks which purchase nonperforming financial assets from other banks shall be required to make the following disclosures in the Notes on Accounts to their Balance sheets: A. 8. 2.1 Writing off of NPAs In terms of Section 43(D) of the Income Tax Act 1961. Details of nonperforming financial assets sold: (Amounts in Rupees crore) 1. Details of nonperforming financial assets purchased: (Amounts in Rupees crore) 1. CIBIL etc. in respect of the nonperforming financial assets purchased by it. 3. whichever is earlier. shall be chargeable to tax in the previous year in which it is credited to the bank‟s profit and loss account or received.2 This stipulation is not applicable to provisioning required to be made as indicated above. (a) (b) 2. number of accounts restructured during the year Aggregate outstanding B. The purchasing bank shall furnish all relevant reports to RBI. Hence these banks should ensure compliance with the prudential credit exposure ceilings (both single and group) after reckoning the exposures to the obligors arising on account of the purchase. 8. income by way of interest in relation to such categories of bad and doubtful debts as may be prescribed having regard to the guidelines issued by the RBI in relation to such debts.applicable. 7. amounts set aside for making provision for NPAs as above are not 43 DBOD-MC on IRAC Norms-2010 . (a) (b) No. In other words. 8.7. of accounts purchased during the year Aggregate outstanding Of these. of accounts sold Aggregate outstanding Aggregate consideration received C. (E) Exposure Norms The purchasing bank will reckon exposure on the obligor of the specific financial asset.

the banks should either make full provision as per the guidelines or write- off such advances and claim such tax benefits as are applicable.4 Write-off at Head Office Level Banks may write-off advances at Head Office level.eligible for tax deductions. 8. 8. In other words. even though the relative advances are still outstanding in the branch books. However. if an advance is a loss asset. by evolving appropriate methodology in consultation with their auditors/tax consultants. 100 percent provision will have to be made therefor. 44 DBOD-MC on IRAC Norms-2010 . it is necessary that provision is made as per the classification accorded to the respective accounts.3 Therefore. Recoveries made in such accounts should be offered for tax purposes as per the rules.

1 Background The guidelines issued by the Reserve Bank of India on restructuring of advances (other than those restructured under a separate set of guidelines issued by the Rural Planning and Credit Department (RPCD) of the RBI on restructuring of advances on account of natural calamities) are divided into the following four categories : (i) (ii) Guidelines on restructuring of advances extended to industrial units. 9.PART B Prudential Guidelines on Restructuring of Advances by Banks 9. Further. the prudential regulations needed to be aligned in all cases. other than those restructured on account of natural calamities which will continue to be covered by the extant guidelines issued by the RPCD were harmonised in August 2008. outside CDR Mechanism. Another difference is that the prudential regulations covering the CDR Mechanism and restructuring of advances extended to SMEs are more detailed and comprehensive than that covering the restructuring of the rest of the advances including the advances extended to the industrial units. SME Debt Restructuring Mechanism and outside these mechanisms) continue to be classified in the existing asset classification category upon restructuring. This benefit of retention of asset classification on restructuring is not available to the accounts of borrowers engaged in non-industrial activities except to SME borrowers. 9. the CDR Mechanism is available only to the borrowers engaged in industrial activities.2 Since the principles underlying the restructuring of all advances were identical. In addition an elaborate institutional mechanism has been laid down for accounts restructured under CDR Mechanism. The 45 DBOD-MC on IRAC Norms-2010 . These prudential norms applicable to all restructurings including those under CDR Mechanism are laid down in para 11. the differentiation has been broadly made based on whether a borrower is engaged in an industrial activity or a nonindustrial activity. the prudential norms across all categories of debt restructuring mechanisms. Guidelines on restructuring of advances extended to industrial units under the Corporate Debt Restructuring (CDR) Mechanism Guidelines on restructuring of advances extended to Small and Medium Enterprises (SME) (iii) (iv) Guidelines on restructuring of all other advances. the accounts of borrowers engaged in industrial activities (under CDR Mechanism. Accordingly. The major difference in the prudential regulations lies in the stipulation that subject to certain conditions. In these four sets of guidelines on restructuring of advances.

1 Banks may restructure the accounts classified under 'standard'.2. which are not covered under the CDR Mechanism. advances classified as capital market and real estate exposures).2. banks are also encouraged to strengthen the coordination among themselves in the matter of restructuring of consortium / multiple banking accounts. if they are otherwise eligible for restructuring as per the criteria laid down for this purpose.2 would stand modified by the provisions in para 14.2. While a restructuring proposal is under consideration. 9. 'sub- standard' and 'doubtful' categories. with the exception of the borrowal categories specified in para 14. 11.2. the usual asset classification norms would continue to apply.1 and 11. It may be noted that while the general principles laid down in para 11 inter-alia stipulate that 'standard' advances should be re-classified as 'sub-standard' immediately on restructuring. General Principles and Prudential Norms for Restructured Advances The principles and prudential norms laid down in this paragraph are applicable to all advances including the borrowers.1.e consumer and personal advances.1. the provisions of paras 11.1. Key Concepts Key concepts used in these guidelines are defined in Annex-5.1 below ( i.3 The CDR Mechanism (Annex 4) will also be available to the corporates engaged in non-industrial activities. subject to the conditions enumerated in para 14.details of the institutional / organizational framework for CDR Mechanism and SME Debt Restructuring Mechanism are given in Annex-4. all borrowers.1 Eligibility criteria for restructuring of advances 11. The asset classification status as on the date of approval of the restructured package by the competent authority would be relevant to decide the asset classification status of the account after restructuring / rescheduling / renegotiation. In these cases. 11. 11.2 Banks can not reschedule / restructure / renegotiate borrowal accounts with retrospective effect. 10. will be entitled to retain the asset classification upon restructuring. 11. The process of reclassification of an asset should not stop merely because restructuring proposal is under consideration. who are eligible for special regulatory treatment for asset classification as specified in para 14. In case there is undue delay in sanctioning a restructuring package 46 DBOD-MC on IRAC Norms-2010 . Further.

The viability should be determined by the banks based on the acceptable viability benchmarks determined by them.1. Illustratively.5 While the borrowers indulging in frauds and malfeasance will continue to remain ineligible for restructuring. banks may review the reasons for classification of the borrowers as wilful defaulters specially in old cases where the manner of classification of a borrower as a wilful defaulter was not transparent and satisfy itself that the borrower is in a position to rectify the wilful default. 11. depending on merits of each case. Any restructuring done without looking into cash flows of the borrower and assessing the viability of the projects / activity financed by banks would be treated as an attempt at ever greening a weak credit facility and would invite supervisory concerns / action. while for such accounts the restructuring under the CDR Mechanism may be carried out with the approval of the Core Group only. Gap between the Internal Rate of Return and Cost of Funds and the amount of provision required in lieu of the diminution in the fair value of the restructured advance.1.4 No account will be taken up for restructuring by the banks unless the financial viability is established and there is a reasonable certainty of repayment from the borrower. the parameters may include the Return on Capital Employed.1. may consider the proposals for restructuring in such cases. 11. 11.6 BIFR cases are not eligible for restructuring without their express approval. which may be applied on a case-by-case basis. CDR Core Group in the case of advances restructured under CDR Mechanism / the lead bank in the case of SME Debt Restructuring Mechanism and the individual banks in other cases. it would be a matter of supervisory concern.3 Normally. However. 11. The accounts not considered viable should not be restructured and banks should accelerate the recovery measures in respect of such accounts. 47 DBOD-MC on IRAC Norms-2010 . restructuring can not take place unless alteration / changes in the original loan agreement are made with the formal consent / application of the debtor. the process of restructuring can be initiated by the bank in deserving cases subject to customer agreeing to the terms and conditions. after ensuring that all the formalities in seeking the approval from BIFR are completed before implementing the package.and in the meantime the asset classification status of the account undergoes deterioration.1. as per the terms of restructuring package. The restructuring of such cases may be done with Board's approval. Debt Service Coverage Ratio.

If the restructured asset is a sub-standard or a doubtful asset and is 48 DBOD-MC on IRAC Norms-2010 .2 The non-performing assets. However. however.5 Any additional finance may be treated as 'standard asset'. satisfactory performance after the specified period is not evidenced. is subjected to restructuring on a subsequent occasion. If the restructured asset does not qualify for upgradation at the end of the above specified one year period.1 classified as 'sub-standard assets' upon restructuring.2. it should be classified as substandard.6 In case a restructured asset. interest income on the additional finance should be recognised only on cash basis. the asset classification of the restructured account would be governed as per the applicable prudential norms with reference to the pre-restructuring payment schedule.2. 11.2. 11.4 In case. The accounts classified as 'standard assets' should be immediately re- (c) 11.2 Asset classification norms Restructuring of advances could take place in the following stages : (a) (b) before commencement of commercial production / operation. after commencement of commercial production / operation but before the asset has been classified as 'sub-standard'. falls due under the approved restructuring package.2.2. whichever is earlier. which is a standard asset on restructuring. in the case of accounts where the prerestructuring facilities were classified as 'sub-standard' and 'doubtful'.11. would continue to have the same asset classification as prior to restructuring and slip into further lower asset classification categories as per extant asset classification norms with reference to the pre-restructuring repayment schedule. 11. up to a period of one year after the first interest / principal payment. upon restructuring.3 All restructured accounts which have been classified as non-performing assets upon restructuring. would be eligible for up-gradation to the 'standard' category after observation of 'satisfactory performance' during the 'specified period' (Annex-5). 11. the additional finance shall be placed in the same asset classification category as the restructured debt.2. 11. after commencement of commercial production / operation and the asset has been classified as 'sub-standard' or 'doubtful'.

and in an account distinct from that for normal provisions. It is. such advances restructured on second or more occasion may be allowed to be upgraded to standard category after one year from the date of first payment of interest or repayment of principal whichever falls due earlier in terms of the current restructuring package subject to satisfactory performance. on a subsequent occasion. necessary for banks to measure such diminution in the fair value of the advance and make provisions for it by debit to Profit & Loss Account. interest income in respect of restructured accounts classified as 'standard assets' will be recognized on accrual basis and that in respect of the accounts classified as 'non-performing assets' will be recognized on cash basis. 11. 11.1 above. discounted at a rate equal to the bank's BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower 49 DBOD-MC on IRAC Norms-2010 .4 Provisioning norms 11. as part of the restructuring.1 Normal provisions Banks will hold provision against the restructured advances as per the existing provisioning norms.4.2. will result in diminution in the fair value of the advance. therefore.4. its asset classification will be reckoned from the date when it became NPA on the first occasion. Such provision should be held in addition to the provisions as per existing provisioning norms as indicated in para 11.4.2. 12.3 Income recognition norms Subject to provisions of paragraphs 11. the erosion in the fair value of the advance should be computed as the difference between the fair value of the loan before and after restructuring.5.2 and 13. Such diminution in value is an economic loss for the bank and will have impact on the bank's market value of equity.2 (i) Provision for diminution in the fair value of restructured advances Reduction in the rate of interest and / or reschedulement of the repayment of principal amount. Fair value of the loan before restructuring will be computed as the present value of cash flows representing the interest at the existing rate charged on the advance before restructuring and the principal. For this purpose. However. 11.subjected to restructuring.

1/. The above formula moderates the swing in the diminution of present value of loans with the interest rate cycle and will have to follow consistently by banks in future. it should be valued at Re. (iii) In the event any security is taken in lieu of the diminution in the fair value of the advance. discounted at a rate equal to the bank's BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring. 50 DBOD-MC on IRAC Norms-2010 . These provisions are distinct from the provisions which are linked to the asset classification of the account classified as NPA and reflect the impairment due to deterioration in the credit quality of the loan. so as to capture the changes in the fair value on account of changes in BPLR.till maturity of the security. Fair value of the loan after restructuring will be computed as the present value of cash flows representing the interest at the rate charged on the advance on restructuring and the principal. the diminution in the fair value of the cash credit / overdraft component may be computed as indicated in para (i) above. Further. (iv) The diminution in the fair value may be re-computed on each balance sheet date till satisfactory completion of all repayment obligations and full repayment of the outstanding in the account. term premium and the credit category of the borrower. This will ensure that the effect of charging off the economic sacrifice to the Profit & Loss account is not negated. (ii) In the case of working capital facilities. it is reiterated that the provisions required as above arise due to the action of the banks resulting in change in contractual terms of the loan upon restructuring which are in the nature of financial concessions. Thus. reckoning the higher of the outstanding amount or the limit sanctioned as the principal amount and taking the tenor of the advance as one year. The fair value of the term loan components (Working Capital Term Loan and Funded Interest Term Loan) would be computed as per actual cash flows and taking the term premium in the discount factor as applicable for the maturity of the respective term loan components. The term premium in the discount factor would be as applicable for one year. the two types of the provisions are not substitute for each other.category on the date of restructuring. banks may provide for the shortfall in provision or reverse the amount of excess provision held in the distinct account. Consequently.

the income. generated by these instruments may be recognised only on cash basis.2.Performing Accounts In the case of restructured accounts classified as non-performing assets. generated by these instruments may be recognised on accrual basis. Equity classified as standard asset should be valued either at market value. a bank finds it difficult to ensure computation of diminution in the fair value of advances extended by small / rural branches. 12.4. or at 51 DBOD-MC on IRAC Norms-2010 . if quoted. The debt / equity instruments so created will be classified in the same asset classification category in which the restructured advance has been classified. banks will have the option of notionally computing the amount of diminution in the fair value and providing therefor.1 Standard Accounts In the case of restructured accounts classified as 'standard'. the income. as an alternative to the methodology prescribed above for computing the amount of diminution in the fair value.2 Non. at five percent of the total exposure. 12. in respect of all restructured accounts where the total dues to bank(s) are less than rupees one crore till the financial year ending March 2011.3 Valuation and provisioning norms These instruments should be held under AFS and valued as per usual valuation norms.2 Income recognition norms 12. Prudential Norms for Conversion of Principal into Debt / Equity 12. 12.1 Asset classification norms A part of the outstanding principal amount can be converted into debt or equity instruments as part of restructuring.(v) If due to lack of expertise / appropriate infrastructure.2. if any. Further movement in the asset classification of these instruments would also be determined based on the subsequent asset classification of the restructured advance. if any.3 The total provisions required against an account ( normal provisions plus provisions in lieu of diminution in the fair value of the advance) are capped at 100% of the outstanding debt amount. The position would be reviewed thereafter. 11. 12.

generated by these instruments may be recognised on accrual basis. if any. Equity instrument classified as NPA should be valued at market value.3 In the case of conversion of unrealised interest income into equity.2.2.2. and on cash basis in the cases where these have been classified as a non-performing asset. on the date of such up gradation. 13. 13. In case the latest balance sheet is not available the shares are to be valued at Rs 1. if not quoted (without considering the revaluation reserve. Prudential Norms for Conversion of Unpaid Interest into 'Funded Interest Term Loan' (FITL). Further movement in the asset classification of FITL / debt or equity instruments would also be determined based on the subsequent asset classification of the restructured advance.2 Income recognition norms 13.1 Asset classification norms The FITL / debt or equity instrument created by conversion of unpaid interest will be classified in the same asset classification category in which the restructured advance has been classified. 52 DBOD-MC on IRAC Norms-2010 .2 The unrealised income represented by FITL / Debt or equity instrument should have a corresponding credit in an account styled as "Sundry Liabilities Account (Interest Capitalization)". while simultaneously reducing the balance in the "Sundry Liabilities Account (Interest Capitalisation)". 13. 13.2. not exceeding the amount of interest converted into equity. the amount received will be recognized in the P&L Account. if any. 1.1 The income. 13. interest income can be recognized after the account is upgraded to standard category at market value of equity.it should be valued at Rs. Depreciation on these instruments should not be offset against the appreciation in any other securities held under the AFS category. and in case where equity is not quoted.)which is to be ascertained from the company's latest balance sheet. which is quoted.break-up value. if these instruments are classified as 'standard'. if quoted. Debt or Equity Instruments 13.4 Only on repayment in case of FITL or sale / redemption proceeds of the debt / equity instruments.

14. the asset classification status may be restored to the position which existed when the reference was made to the CDR Cell in respect of cases covered under the CDR Mechanism or when the restructuring application was received by the bank in non-CDR cases: 53 DBOD-MC on IRAC Norms-2010 .3 above. Retention of the asset classification of the restructured account in the pre-restructuring asset classification category 14.13. The process of reclassification of an asset should not stop merely because the application is under consideration.3 Valuation & Provisioning norms Valuation and provisioning norms would be as per para 12.2 below.2. Advances classified as commercial real estate exposures The asset classification of these three categories accounts as well as that of other accounts which do not comply with the conditions enumerated in para 14. iii. 14. will be governed by the prudential norms in this regard described in para 11 above. in modification to the provisions in this regard stipulated in para 11. Such treatment is not extended to the following categories of advances: i. Advances classified as Capital market exposures. if any. the usual asset classification norms would continue to apply. Consumer and personal advances.1. if the approved package is implemented by the bank as per the following time schedule. will be available to the borrowers engaged in important business activities. subject to compliance with certain conditions as enumerated in para 14.1 Incentive for quick implementation of the restructuring package As stated in para 11. during the pendency of the application for restructuring of the advance with the bank. ii. 14. on valuation may be charged to the Sundry Liabilities (Interest Capitalisation) Account.2 Elements of special regulatory framework The special regulatory treatment has the following two components : (i) (ii) Incentive for quick implementation of the restructuring package.2.1 Special Regulatory Treatment for Asset Classification The special regulatory treatment for asset classification. The depreciation. as an incentive for quick implementation of the package.2. However.

2. and also have a clear and legal first claim on these cash flows.(i) (ii) Within 120 days from the date of approval under the CDR Mechanism. The condition of being fully secured by tangible security will not be applicable in the following cases: (a) (b) SSI borrowers.2. if satisfactory performance is demonstrated during the specified period. in these cases 54 DBOD-MC on IRAC Norms-2010 . provided the cash flows generated from these projects are adequate for repayment of the advance. does not exceed 15 years in the case of infrastructure advances and 10 years in the case of other advances. if it is engaged in infrastructure activities.2 Subject to the compliance with the undernoted conditions in addition to the adherence to the prudential framework laid down in para 11: (i) In modification to para 11.1. Asset classification benefits 14. and in 7 years in the case of other units. Infrastructure projects. Within 90 days from the date of receipt of application by the bank in cases other than those restructured under the CDR Mechanism. ii) The unit becomes viable in 10 years. if any. where the outstanding is up to Rs. the financing bank(s) have in place an appropriate mechanism to escrow the cash flows. iii) The repayment period of the restructured advance including the moratorium. the asset classification of the sub-standard / doubtful accounts will not deteriorate upon restructuring. However. (ii) In modification to para 11. The aforesaid ceiling of 10 years would not be applicable for restructured home loans. an existing 'standard asset' will not be downgraded to the sub-standard category upon restructuring.25 lakh. these benefits will be available subject to compliance with the following conditions: i) The dues to the bank are 'fully secured' as defined in Annex 5.2. during the specified period.2.

Lending to individuals meant for acquiring residential property which are fully secured by mortgages on residential property that is or will be occupied by the borrower or that is rented are risk weighted as under the new capital adequacy framework. 15. 55 DBOD-MC on IRAC Norms-2010 . However.4. provided the LTV is not more than 75% . iv) Promoters' sacrifice and additional funds brought by them should be a minimum of 15% of banks' sacrifice. the restructured housing loans should be risk weighted with an additional risk weight of 25 percentage points to the risk weight prescribed already.1 Miscellaneous The banks should decide on the issue regarding convertibility (into equity) option as a part of restructuring exercise whereby the banks / financial institutions shall have the right to convert a portion of the restructured amount into equity. this will be subject to reporting of such holdings to RBI. banks will have to comply with the provisions of Section 19(2) of the Banking Regulation Act. v) Personal guarantee is offered by the promoter except when the unit is affected by external factors pertaining to the economy and industry. vi) The restructuring under consideration is not a 'repeated restructuring' as defined in para (v) of Annex 5.2 (i) above. based on board approved valuation policy. every month along with the regular DSB Return on Asset Quality. Department of Banking Supervision (DBS).the Board of Director of the banks should prescribe the maximum period for restructured advance keeping in view the safety and soundness of the advances. However. the additional funds required to be brought in by the promoter should be brought up front and not be phased over a period of time. The term 'bank's sacrifice' means the amount of "erosion in the fair value of the advance".2 Acquisition of equity shares / convertible bonds / convertible debentures in companies by way of conversion of debt / overdue interest can be done without seeking prior approval from RBI. 1949. Further. 15. 1949. keeping in view the statutory requirement under Section 19 of the Banking Regulation Act. (in the case of banks) and relevant SEBI regulations. 15. Nonetheless. even if by such acquisition the prudential capital market exposure limit prescribed by the RBI is breached. to be computed as per the methodology enumerated in para 11.

This means even if only one of the facilities / accounts of a borrower has been restructured. This can be achieved by banks and the borrowers only by careful assessment of the viability. 18. 56 DBOD-MC on IRAC Norms-2010 .4 Banks may consider incorporating in the approved restructuring packages creditor's rights to accelerate repayment and the borrower's right to pre-pay. The right of recompense should be based on certain performance criteria to be decided by the banks. 2009. prescribed by the RBI. certain modifications were made in the guidelines on restructuring as a onetime measure and for a limited period of time i. and the amount of diminution in the fair value of the restructured advances in Annex-7.15. These relaxations have ceased to operate from July 1. not evergreening of problem accounts. under "Notes on Accounts". We re-iterate that the basic objective of restructuring is to preserve economic value of units.3 Acquisition of non-SLR securities by way of conversion of debt is exempted from the mandatory rating requirement and the prudential limit on investment in unlisted non-SLR securities. SME Debt Restructuring Mechanism and other categories separately. quick detection of weaknesses in accounts and a time-bound implementation of restructuring packages.5 Since the spillover effects of the global downturn had also started affecting the Indian economy particularly from September 2008 onwards creating stress for the otherwise viable units / activities. 15. Illustrations A few illustrations on the asset classification of restructured accounts are given in Annex-7. subject to periodical reporting to the RBI in the aforesaid DSB return. information relating to number and amount of advances restructured. Banks must disclose the total amount outstanding in all the accounts / facilities of borrowers whose accounts have been restructured along with the restructured part or facility. The information would be required for advances restructured under CDR Mechanism. 15. 2009. the bank should also disclose the entire outstanding amount pertaining to all the facilities / accounts of that particular borrower. Disclosures Banks should also disclose in their published annual Balance Sheets.e. 17. up to June 30. 16. however the same have been consolidated in Annex 8.

20.PLFS. provided adequate provision is made for the loss in Present Value (PV) terms. in the case of 'other farmers'. for implementation by.72/05. and Capital Adequacy 19.PLFS. 2008 .04. all scheduled commercial banks (SCBs). 2008.No. inter alia.1 Norms for the Accounts subjected to Debt Waiver 20. Prudential Norms for the Borrowal Accounts Covered under the Agricultural Debt Waiver and Debt Relief Scheme.Prudential Norms on Income Recognition. are furnished below. computed under the assumption that such payments would be received from Government of India in the following installments : a) 32% of the total amount due by September 30. The detailed scheme announced by the Government of India was communicated to the SCBs and LABs vide our circular RPCD. 2008. The balance in this account should be reflected in Schedule 9 (Advances) of the Balance sheet.1 As regards the small and marginal farmers eligible for debt waiver.02/2007-08 dated May 23.02/2007-08 dated May 23.BC. The guidelines pertaining to Income Recognition. 2008.Part C Agricultural Debt Waiver and Debt Relief Scheme.No. there will be a one time settlement scheme (OTS) under which the farmer will be given a rebate of 25 per cent of the 'eligible amount' subject to the condition that the farmer repays the balance of 75 per cent of the 'eligible amount'. as defined in the Para 4 of the enclosure to the aforesaid circular.04. 57 DBOD-MC on IRAC Norms-2010 . The Background The Hon'ble Finance Minister. Asset Classification.2 The balance in this account may be treated by the banks as a "performing" asset. and Local Area Banks (LABs). pending receipt from the Government of India. in his Budget Speech (paragraph 73) for 2008-09 has announced a debt waiver and debt relief scheme for farmers. may be transferred by the banks to a separate account named "Amount receivable from Government of India under Agricultural Debt Waiver Scheme 2008".72/05. and Capital Adequacy as applicable to the loans covered by the captioned scheme.1.1. 20. the amount eligible for waiver.BC. Government of India. Asset Classification and Provisioning. 20. while the entire 'eligible amount' shall be waived in the case of a small or marginal farmer. Provisioning. 2008 (ADWDRS) As advised vide the circular RPCD.

2009.2 above should be taken as 9.048/2008-09 dated July 30.1 Under the scheme.2. 20. being the yield to maturity on 364-day Government of India Treasury Bill.1.2. have been received.1. 19%. and 10% during the years ended March 2009. the farmer will be given a rebate of 25% of the "eligible amount".BC. below the line. the amount of prudential provision held is more than the amount of provision required on PV basis. by the Government by credit to his account.b) c) d) 19% by July 31.7 In case the claim of a farmer is specifically rejected at any stage.4 The prudential provisions held in respect of the NPA accounts for which the debt waiver has been granted may be reckoned for meeting the provisions required on PV basis. the asset classification of the account should be determined with reference to the original date of NPA (as if the account had not been treated as performing in the interregnum based on the transfer of the loan balance to the aforesaid account) and suitable provision should be made.6 On receipt of the final instalment from the Government.1.26/21. However. 20. 2010.1. such excess provision may be reversed in a phased manner. 39% by July 2010. Norms for the Accounts subjected to the Debt Relief 20.BP. and the remaining 10% by July 2011. 20. only after the installments due from the Government. 20.04. 2008. prevailing as on the date of the circular DBOD. 58 DBOD-MC on IRAC Norms-2010 . for the relative years. need not be provided for in respect of the balance in this account. 20.56 per cent. the provision required under the current norms for standard assets. 39%. The provision made on PV basis may also be reckoned against the NPA-provisions required. 2011 and 2012. respectively. consequent upon the account being treated as NPA due to the rejection of the claim.1. however. the provision made for loss in PV terms may be transferred to the General Reserves. in the case of 'other' farmers. This phased reversal may be effected in the proportion of 32%. 20.3 The discount rate for arriving at the loss in PV terms as at para 20.No.1.5 In case.

2.2. Accordingly. if any.2. 2009 and June 30. The Scheme provides for payment of share of 75% by such farmers in three instalments and the first two instalments shall be for an amount not less than one-third of the farmer's share. available from the Government. Asset Classification 20. respectively. The discount rate to be applied for the purpose should be the interest rate at which the loan was granted including the element of interest subsidy. 2009 (cf Para 21.2. 2008. for which the debt relief has been granted. and such farmers pay their share of the settlement within one month of the due dates (b) However. no grace period is allowed for the last instalment and the entire share of the farmer is payable by June 30. agreeing to pay their share under the OTS. may be reckoned for meeting the provisions 59 DBOD-MC on IRAC Norms-2010 . as per the repayment schedule vide para 20.1 above.3 Provisioning for Standard Assets The accounts subject to debt relief would stand classified as standard assets after receipt of the aforesaid undertaking from the borrowers.5 The prudential provisions held in respect of the NPA accounts. 2009.2) Provisioning 20.4 Provisioning on PV Basis For computing the amount of loss in PV terms under the Scheme.2. the cash flows receivable from the farmers. It may be assumed in this context that the Government's contribution would be received by June 30. as well as from the government should be discounted to the present value. such accounts would also attract the prudential provisioning as applicable to standard assets. The last dates of payment of the three instalments will be September 30. 2010. their relevant accounts may be treated by banks as "standard" / "performing" provided : (a) adequate provision is made by the banks for the loss in PV terms for all the receivables due from the borrowers as well as the Government. March 31. 20.provided the farmer pays the balance of 75% of the 'eligible amount'.2 Where the farmers covered under the Debt Relief Scheme have given the undertaking. 20.

the total provisions held would comprise the provisions required on PV basis.at which point. may be provided for. the accounts subject to Debt Relief Scheme would be classified as standard / performing assets only if the farmers pay their share of the settlement within one month of the pre-specified due dates.2. viz. 20.required on PV basis as well as for the standard assets (pursuant to classification of these loans as standard) and shortfall. the payments are delayed by the farmers beyond one month of the respective due dates. additional provisions as per the extant prudential norms should also be made. Thus. the amount of provisions held for standard assets (as per para 3. held. or when the amount of such excess provision exceeds the amount outstanding on account of the repayments by the borrower .2. provision for standard assets and excess prudential provisions. the excess prudential provisions. could be reckoned. towards NPA. Such additional prudential provisions too should be continued to be held and reversed only as per the stipulation at para 20. 20. (as if the account had not been treated as performing in the interregnum based on the aforesaid undertaking).3 above) together with the provision made on PV basis.2. the outstanding amount in the relevant accounts of such farmers shall be treated as NPA.2 (b) above. On such down-gradation of the accounts.7 below.2. : (a) (b) till the entire outstanding of the borrower stands repaid .. such excess prudential provision should not be reversed but be continued to be held till the earlier of the two events. all in respect of such downgraded account. The asset classification of such accounts shall be determined with reference to the original date of NPA.6 Provisioning in case of down-gradation of accounts: As mentioned at para 20.at which point. if any.7 Reversal of Excess Prudential Provisions In case the amount of the prudential NPA provisions held are larger than the aggregate of the provision required on PV basis and for the standard assets (pursuant to classification of these loans as standard). the amount of provision in excess of the outstanding amount could be reversed to the P/L account. if any. For meeting this additional provisioning requirement. In case. the entire amount could be reversed to the P/L account. however. 60 DBOD-MC on IRAC Norms-2010 . if any.

PLFS. 20. these fresh loans may be treated as "performing assets".20.04. 3rd. However.4 Capital Adequacy The amount outstanding in the account styled as "Amount receivable from Government of India under Agricultural Debt Waiver Scheme 2008" shall be treated as a claim on the Government of India and would attract zero risk weight for the purpose of capital adequacy norms.No.3. 2008. in terms of para 7.02/2007-08 dated May 23. The amount of such provision should. July 2010. and its subsequent asset classification should be governed by the extant IRAC norms. regardless of the asset classification of the loan subjected to the Debt Relief.7. the amount outstanding in the accounts covered by the Debt Relief Scheme shall be treated as a claim on the borrowers and risk weighted as per the extant norms. 2008. The fresh loan may be treated as "performing asset".72/05. therefore.8 Reversal of the Provisions made on PV Basis The provision made on PV basis represents a permanent loss to the bank on account of delayed receipt of cash flows and hence. below the line.BC. as provided for in Para 7.No.72/05.3 Grant of Fresh Loans to the Borrowers covered under the ADWDRS 20.PLFS.6 and 7. 20. be carried till the account is finally settled and after receipt of the Government's contribution under the Scheme. at the prevailing 61 DBOD-MC on IRAC Norms-2010 . of the enclosure to the circular RPCD. This treatment would apply under the Basel I as well as Basel II Frameworks.3.BC. should not be reversed to the P/L Account.04.2.1 A small or marginal farmer will become eligible for fresh agricultural loans upon the eligible amount being waived. regardless of the asset classification of the loan subjected to the Debt Waiver. respectively. 21.2 In case of "other farmers" eligible for fresh short-term production loans and investment loans.02/2007-08 dated May 23. the amount should be reversed to the General Reserves.2 of the enclosure to the circular RPCD. and its subsequent asset classification should be governed by the extant IRAC norms.1 Subsequent Modifications to the Prudential Norms Interest payment by the GOI The Government of India has subsequently decided to pay interest on the 2nd. 20. payable by July 2009. 21. and 4th instalments. and July 2011 respectively.

4 to 20. 2010. Further.Yield to Maturity Rate on 364-day Government of India Treasury Bills.2 Change in instalment schedule of “other farmers” under the Debt Relief Scheme In view of the recent drought in some States and the severe floods in some other parts of the country. as announced in the Union Budget 2010-11.2. it has been decided that the banks need not make any provisions for the loss in Present Value (PV) terms for moneys receivable only from the Government of India. (as if the account had not been treated as performing in the interregnum based on the aforesaid undertaking). additional provisions as per the extant prudential norms should also be made. The banks will not charge any interest on the eligible amount for the period from February 29. 21. has now decided to extend the last date of payment of 75% of overdue portion by the 'other farmer' under Debt Relief Scheme (under ADWDR) up to June 30. they may charge normal rate of interest on the eligible amount from July 01. 2010. In view of the above. however.2 (a). The interest will be paid on these instalments from the date of the reimbursement of the first instalment (i. the Government of India.7.2. The eligible "other farmers" may be allowed to repay this amount in one or more instalments up to June 30. The Government will pay only 25% of the actual eligible amount under debt relief.e. 2008 to June 30. 21. the outstanding amount in the relevant accounts of such farmers shall be treated as NPA. 62 DBOD-MC on IRAC Norms-2010 .8 above.1. in supersession of the instructions contained in paragraphs 20. On such down-gradation of the accounts.3 In case.2 to 20.2. and 20. 20. The asset classification of such accounts shall be determined with reference to the original date of NPA. for the accounts covered under the Debt Waiver Scheme and the Debt Relief Scheme. no interest shall be paid by the Government of India to the lending institutions for this extension under the Scheme while reimbursing the 25% amount to the lending institutions as per the delayed reimbursement schedule The Government of India has also advised that the banks / lending institutions are allowed to receive even less than 75% of the eligible amount under OTS provided the banks / lending institutions bear the difference themselves and do not claim the same either from the Government or from the farmer. the payments are delayed by the farmers beyond June 30. However. 2009. November 2008) till the date of the actual reimbursement of each instalment. 2009 up to the date of settlement.1. 2010.

and the balance in this account should be reflected in Schedule 9 (Advances) of the Balance Sheet. 63 DBOD-MC on IRAC Norms-2010 .1. and bearing the nomenclature "Amount receivable from Government of India under Agricultural Debt Relief Scheme 2008". similar to the one opened for the receivables from GOI under the Debt Waiver Scheme. after the 'other farmer' has paid his entire share of 75%.21. pending receipt from the Government of India may be transferred by the banks to a separate account named "Amount receivable from Government of India under Agricultural Debt Waiver Scheme 2008". It is now clarified that in case of 'other farmers' eligible for debt relief. banks may open an account for Debt Relief Scheme. This amount may also be reflected in Schedule 9 (Advances) of the Balance Sheet. the amount eligible for waiver.1 which provides that in case of small and marginal farmers eligible for debt waiver.4 Please refer to the paragraph 20.

Net NPAs as percentage of Net Advances (7/6) (in %) * Principal dues of NPAs plus Funded Interest Term Loan (FITL) where the corresponding contra credit is parked in Sundries Account (Interest Capitalization Restructured Accounts). Part B Supplementary Details (Rs. Gross NPAs as a percentage of Gross Advances (2/3) (in %) 5.Off in respect of NPA accounts reported in Part A above Amount 64 DBOD-MC on IRAC Norms-2010 . Net Advances(3-5) 7.5) Part A Details of Gross Advances. to the extent. Net NPAs {2-5(i + ii + iii + iv + v + vi)} 8. Gross NPAs. banks have exercised this option. and advances written off at Head Office level (Technical write off). Gross Advances ** ( 1+2 ) 4. *** Floating Provisions would be deducted while calculating Net NPAs. Provisions on Standard Assets excluding 5(vi) in Part A above 2. Amount (ii) DICGC / ECGC claims received and held pending adjustment (iii) Part payment received and kept in Suspense Account or any other similar account (iv) Balance in Sundries Account (Interest Capitalization Restructured Accounts). over utilising it towards Tier II capital. in respect of NPA Accounts. in respect of NPA Accounts (v) Floating Provisions*** (vi) Provisions in lieu of diminution in the fair value of restructured accounts classified as NPAs (vii) Provisions in lieu of diminution in the fair value of restructured accounts classified as standard assets 6. Interest recorded as Memorandum Item 3. Gross NPAs * 3. ** For the purpose of this Statement. in crores up to two decimals) Particulars 1. para 3. Standard Advances 2. Net Advances and Net NPAs (Rs. in crores up to two decimals) Particulars 1. Amount of cumulative Technical Write . Deductions (i) Provisions held in the case of NPA Accounts as per asset classification (including additional Provisions for NPAs at higher than prescribed rates). „Gross Advances' mean all outstanding loans and advances including advances for which refinance has been received but excluding rediscounted bills.Annex – 1 (Cf.

1 Short-term loans for raising crops.01/ 2009-10 dated July 1. Working capital and term loans for financing production and investment requirements for agriculture.5 1. Advances up to Rs.2 1.1 above. 2 /04. SHGs and cooperatives in rural areas. 1. harvesting.1.2 1.3 1.2 Finance to others [such as corporates. 1. harvesting.2.2.1.RPCD. i. Loans to small and marginal farmers for purchase of land for agricultural purposes.Annex .6 1. one crore in aggregate per borrower for agriculture. grading. against appropriate collateral or group security. Plan. BC. sorting.09.2.1.3 65 DBOD-MC on IRAC Norms-2010 .2. Loans to distressed farmers indebted to non-institutional lenders.13) Relevant extract of the list of direct agricultural advances. from the Master Circular on lending to priority sector . 2009 DIRECT FINANCE 1. i.1. No. One-third of loans in excess of Rs.1 Finance to individual farmers [including Self Help Groups (SHGs) or Joint Liability Groups (JLGs).4 1. one crore per borrower for the purposes listed at 1. weeding.2.1. for crop loans. partnership firms and institutions] for Agriculture 1.e. weeding.1.1. para 4. groups of individual farmers. processing and transporting undertaken by individuals. Finance up to an aggregate amount of Rs. Loans granted for pre-harvest and post-harvest activities such as spraying. grading.1. irrespective of whether the farmers were given crop loans for raising the produce or not. 10 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months. 1.2. This will include traditional / non-traditional plantations and horticulture.2 (Cf.3 and 1.e. provided banks maintain disaggregated data on such finance] for Agriculture 1.1.1 Loans granted for pre-harvest and post harvest activities such as spraying.1. 1. sorting and transporting.

048/200910 dated September 24. Total 5. Amount of Technical write-off should be certified by statutory auditors.BP. Floating Provisions for Advances (only to the extent they are not used as Tier II Capital) 6. Part payment received and kept in Suspense Account or any other similar account 8. Doubtful Advances (a+b+c) a < 1 year b 1-3 Years c >3 years 3. DICGC / ECGC claims received and held pending adjustment 7. Provision Coverage Ratio {(8/Total of Column 3 of Row 4)*100} @ Gross NPAs to be computed in terms of the circular DBOD. Total (Sum of column 4 of Row 4+ Row 5 + Row 6+ Row 7) 9. 4 5 Specific Provisions held including provisions for Diminution in fair value of Ratio of the restructured accounts (4) to (3) classified as NPAs plus Technical / Prudential write-off * 66 DBOD-MC on IRAC Norms-2010 . in Crores 1 2 3 Gross NPA@ Plus Technical / Prudential Write-off * 1. 2009 * Technical or prudential write-off is the amount of non-performing loans which are outstanding in the books of the branches.04. but have been written-off (fully or partially) at Head Office level. Advances classified as Loss Assets 4.46/21.Annex – 3 Format for Computing Provisioning Coverage Ratio (PCR) Rs.BC. Sub-Standard Advances 2.

10 crore or above. the framework will aim at preserving viable corporates that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring programme.2 Scope The CDR Mechanism has been designed to facilitate restructuring of advances of borrowers enjoying credit facilities from more than one bank / Financial Institution (FI) in a coordinated manner. 1.Annex . The CDR Mechanism is an organizational framework institutionalized for speedy disposal of restructuring proposals of large borrowers availing finance from more than one banks / FIs.1 Objective The objective of the Corporate Debt Restructuring (CDR) framework is to ensure timely and transparent mechanism for restructuring the corporate debts of viable entities facing problems. for the benefit of all concerned. This mechanism will be available to all borrowers engaged in any type of activity subject to the following conditions : a) The borrowers enjoy credit facilities from more than one bank / FI under multiple banking / syndication / consortium system of lending. DRT and other legal proceedings. outside the purview of BIFR. In particular. Corporate Debt Restructuring (CDR) Mechanism 1. CDR system in the country will have a three tier structure : • • • CDR Standing Forum and its Core Group CDR Empowered Group CDR Cell 67 DBOD-MC on IRAC Norms-2010 .4 Organisational Framework for Restructuring of Consortium / Multiple Banking / Syndication Arrangements Advances Under A. b) The total outstanding (fund-based and non-fund based) exposure is Rs.

The Forum would also lay down the policies and guidelines including those relating to the critical parameters for restructuring (for example. the Forum may decide to have a Working Chairman as a whole-time officer to guide and carry out the decisions of the CDR Standing Forum. The RBI would not be a member of the CDR Standing Forum and Core Group. these institutions may participate in the CDR system. Chairman. 2. Since institutions like Unit Trust of India.2 The Forum will also provide an official platform for both the creditors and borrowers (by consultation) to amicably and collectively evolve policies and guidelines for working out debt restructuring plans in the interests of all concerned. 2. and monitor the progress of corporate debt restructuring. which will lay down policies and guidelines. ICICI Bank Limited. However. CDR Standing Forum 2.2. Indian Banks' Association as well as Chairmen and Managing Directors of all banks and financial institutions participating as permanent members in the system.) to be followed by the CDR Empowered Group and CDR Cell for debt restructuring and would ensure their smooth functioning and adherence to the prescribed time schedules for debt restructuring. 2. Industrial Development Bank of India Ltd. minimum level of promoters' sacrifice etc. Managing Director & CEO.3 The CDR Standing Forum shall comprise of Chairman & Managing Director. which are complicated and are likely to be delayed beyond the time frame prescribed for processing.4 The CDR Standing Forum shall meet at least once every six months and would review and monitor the progress of corporate debt restructuring system. maximum period for a unit to become viable under a restructuring package.1 The CDR Standing Forum would be the representative general body of all financial institutions and banks participating in CDR system. It can also review any individual decisions of the CDR Empowered Group and CDR Cell. State Bank of India. General Insurance Corporation. The Forum will elect its Chairman for a period of one year and the principle of rotation will be followed in the subsequent years. The CDR Standing Forum may also formulate guidelines for dispensing special treatment to those cases. Life Insurance Corporation may have assumed exposures on certain borrowers. Chairman. Its role will be confined to providing broad guidelines. CDR Standing Forum will be a selfempowered body. 68 DBOD-MC on IRAC Norms-2010 . All financial institutions and banks should participate in the system in their own interest.

CDR Empowered Group 3. These guidelines shall also suitably address the operational difficulties experienced in the functioning of the CDR Empowered Group. Further.1 The individual cases of corporate debt restructuring shall be decided by the CDR Empowered Group. demand. and State Bank of India as standing members. profit margin.. nominees who attend the meeting pertaining to one account should invariably attend all the meetings pertaining to that account instead of deputing their representatives. The Core Group will consist of Chief Executives of Industrial Development Bank of India Ltd. voting will be in proportion to the exposure of the creditors only. State Bank of India. price of products. 3. In order to make the CDR Empowered Group effective and broad based and operate efficiently and smoothly. it would have to be ensured that participating institutions / banks approve a panel of senior officers to represent them in the CDR Empowered Group and ensure that they depute officials only from among the panel to attend the meetings of CDR Empowered Group. The CDR Core Group shall also prescribe the PERT chart for processing of cases referred to the CDR system and decide on the modalities for enforcement of the time frame. 2.. ICICI Bank Ltd. The CDR Core Group shall also lay down guidelines to ensure that over-optimistic projections are not assumed while preparing / approving restructuring proposals especially with regard to capacity utilization. input-output ratio and likely impact of imports / international cost competitiveness.6 The CDR Core Group would lay down the policies and guidelines to be followed by the CDR Empowered Group and CDR Cell for debt restructuring.5 A CDR Core Group will be carved out of the CDR Standing Forum to assist the Standing Forum in convening the meetings and taking decisions relating to policy. in addition to ED level representatives of financial institutions and banks who have an exposure to the concerned company.2. Bank of Baroda. Bank of India. While the standing members will facilitate the conduct of the Group's meetings. consisting of ED level representatives of Industrial Development Bank of India Ltd. ICICI Bank Ltd.2 The level of representation of banks / financial institutions on the CDR Empowered Group should be at a sufficiently senior level to ensure that 69 DBOD-MC on IRAC Norms-2010 . Punjab National Bank. 3. on behalf of the Standing Forum. availability of raw materials. Indian Banks' Association and Deputy Chairman of Indian Banks' Association representing foreign banks in India.

Extent of sacrifice. regarding restructuring of debts of individual corporates.5 Return on Capital Employed (ROCE). examine the viability and rehabilitation potential of the Company and approve the restructuring package within a specified time frame of 90 days. the participating banks / financial institutions should decide upon the alternate institution / bank which would work out the detailed restructuring package at the first meeting of the Empowered Group when the preliminary report of the CDR Cell comes up for consideration. The Board of each bank / FI should authorise its Chief Executive Officer (CEO) and / or Executive Director (ED) to decide on the restructuring package in respect of cases referred to the CDR system. made towards debt restructuring. the detailed restructuring package will be worked out by the CDR Cell in conjunction with the Lead Institution. Debt Service Coverage Ratio (DSCR). authorising them to take decisions on behalf of their organization. or at best within 180 days of reference to the Empowered Group. if the lead institution faces difficulties in working out the detailed restructuring package.3 The CDR Empowered Group will consider the preliminary report of all cases of requests of restructuring. based on the merits of each case : * * * * 3. submitted to it by the CDR Cell. However. with the requisite requirements to meet the control needs. 3. There should be a general authorisation by the respective Boards of the participating institutions / banks in favour of their representatives on the CDR Empowered Group. which may be applied on a case-by-case basis. 3. CDR Empowered Group will meet on two or three occasions in respect of each borrowal account.4 The CDR Empowered Group would be mandated to look into each case of debt restructuring. Gap between the Internal Rate of Return (IRR) and the Cost of Fund (CoF). The CDR Empowered Group shall decide on the acceptable viability benchmark levels on the following illustrative parameters.concerned bank / FI abides by the necessary commitments including sacrifices. This will provide an opportunity to the participating members to seek proper authorisations from their CEO / 70 DBOD-MC on IRAC Norms-2010 . After the Empowered Group decides that restructuring of the company is prima-facie feasible and the enterprise is potentially viable in terms of the policies and guidelines evolved by Standing Forum.

However. the CDR Empowered Group and CDR Cell is at present housed in Industrial Development Bank of India Ltd. 4. If found feasible. If restructuring of debt is found to be viable and feasible and approved by the Empowered Group. 3. collectively or individually.ED.3 The CDR Standing Forum. to work out a preliminary restructuring plan in consultation with other stakeholders and submit to the CDR Cell within one month. It shall be the responsibility of the lead institution / major stakeholder to the corporate. 4. if necessary. experts to be engaged from outside. in case of need. The CDR Cell will make the initial scrutiny of the proposals received from borrowers / creditors. However. The Empowered Group can approve or suggest modifications but ensure that a final decision is taken within a total period of 90 days.1 The CDR Standing Forum and the CDR Empowered Group will be assisted by a CDR Cell in all their functions. the company would be put on the restructuring mode. by calling for proposed rehabilitation plan and other information and put up the matter before the CDR Empowered Group. If not found prima facie feasible. The sharing pattern shall be as determined by the Standing Forum. for sufficient reasons the period can be extended up to a maximum of 180 days from the date of reference to the CDR Cell. the CDR Cell will proceed to prepare detailed Rehabilitation Plan with the help of creditors and. the creditors would then be free to take necessary steps for immediate recovery of dues and / or liquidation or winding up of the company.2 All references for corporate debt restructuring by creditors or borrowers will be made to the CDR Cell. the creditors may start action for recovery of their dues. 71 DBOD-MC on IRAC Norms-2010 . The administrative and other costs shall be shared by all financial institutions and banks. within one month to decide whether rehabilitation is prima facie feasible. as may be decided by the Standing Forum.6 The decisions of the CDR Empowered Group shall be final. it may be shifted to another place if considered necessary. in respect of those cases where the critical parameters of restructuring are beyond the authority delegated to him / her. 4 CDR Cell 4. If restructuring is not found viable. The CDR Cell will prepare the restructuring plan in terms of the general policies and guidelines approved by the CDR Standing Forum and place for consideration of the Empowered Group within 30 days for decision.

In that situation.1. Prescribing any milestone(s) may not be necessary.2 The Category 1 CDR system will be applicable only to accounts classified as 'standard' and 'sub-standard'. Other features 5. The CDR mechanism will cover only multiple banking accounts / syndication / consortium accounts of corporate borrowers engaged in any type of activity with outstanding fund-based and non-fund based exposure of Rs. the Core group may review the reasons for classification of the borrower as wilful defaulter specially in old cases where the manner of classification of a borrower as a wilful defaulter was not transparent and satisfy itself that the borrower is in a position to 72 DBOD-MC on IRAC Norms-2010 . the same would be treated as standard / substandard.1. potentially viable cases of NPAs will get priority. in the books of the remaining 10% of creditors. However. The CDR Cell may also take outside professional help. The cost in operating the CDR mechanism including CDR Cell will be met from contribution of the financial institutions and banks in the Core Group at the rate of Rs. There may be a situation where a small portion of debt by a bank might be classified as doubtful. 5. There would be no requirement of the account / company being sick.1 The scheme will not apply to accounts involving only one financial institution or one bank.10 crore and above by banks and institutions. NPA or being in default for a specified period before reference to the CDR system. 5.50 lakh each and contribution from other institutions and banks at the rate of Rs. since the debt restructuring exercise is being triggered by banks and financial institutions or with their consent.5 lakh each.3 While corporates indulging in frauds and malfeasance even in a single bank will continue to remain ineligible for restructuring under CDR mechanism as hitherto.4 CDR Cell will have adequate members of staff deputed from banks and financial institutions.1 Eligibility criteria 5. only for the purpose of judging the account as eligible for CDR.4. if the account has been classified as 'standard'/ 'substandard' in the books of at least 90% of creditors (by value). 5. This approach would provide the necessary flexibility and facilitate timely intervention for debt restructuring.1.

1. 5. 73 DBOD-MC on IRAC Norms-2010 . The Core Group may ensure that cases involving frauds or diversion of funds with malafide intent are not covered. if supported by a bank or financial institution having stake as in (i) above.1. However. large value BIFR cases may be eligible for restructuring under the CDR system if specifically recommended by the CDR Core Group.3 Legal Basis 5.2. 5. Such exceptional cases may be admitted for restructuring with the approval of the Core Group only. 5.2 Though flexibility is available whereby the creditors could either consider restructuring outside the purview of the CDR system or even initiate legal proceedings where warranted.5 BIFR cases are not eligible for restructuring under the CDR system. 5. may be eligible for consideration under the CDR system provided.2 Reference to CDR system 5.Creditor Agreement (DCA) and Inter-Creditor Agreement (ICA).2. The Core Group shall recommend exceptional BIFR cases on a case-tocase basis for consideration under the CDR system.rectify the wilful default provided he is granted an opportunity under the CDR mechanism. 5. 2002 or to file a suit in DRT etc. banks / FIs should review all eligible cases where the exposure of the financial system is more than Rs.4 The accounts where recovery suits have been filed by the creditors against the company. It should be ensured that the lending institutions complete all the formalities in seeking the approval from BIFR before implementing the package.3. the initiative to resolve the case under the CDR system is taken by at least 75% of the creditors (by value) and 60% of creditors (by number).1 CDR is a non-statutory mechanism which is a voluntary system based on Debtor.100 crore and decide about referring the case to CDR system or to proceed under the new Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act. or (ii) by the concerned corporate.1 Reference to Corporate Debt Restructuring System could be triggered by (i) any or more of the creditor who have minimum 20% share in either working capital or term finance. The Debtor-Creditor Agreement (DCA) and the Inter-Creditor Agreement (ICA) shall provide the legal basis to the CDR mechanism.

either at the time of original loan documentation (for future cases) or at the time of reference to Corporate Debt Restructuring Cell. or 180 days by both sides. the same would be binding on the remaining creditors.3.The debtors shall have to accede to the DCA. etc.e. wherever they have exposure to such corporate. including the agreed additional financing.e. to operate the System through laiddown policies and guidelines. 5. those outside the minimum 75 per cent by value and 60 per cent by number) would be willing to participate in the entire CDR package. Since Category 1 CDR Scheme covers only standard and sub-standard accounts.4 One of the most important elements of Debtor-Creditor Agreement would be 'stand still' agreement binding for 90 days.3. LIC. agree to a restructuring package of an existing debt (i. wherein the creditors would commit themselves to abide by the various elements of CDR system. as and when restructuring may become necessary. debt outstanding). Similarly.2 The Inter-Creditor Agreement would be a legally binding agreement amongst the creditors. Further. which in the opinion of 75 per cent of the creditors by value and 60 per cent of creditors by number. with necessary enforcement and penal clauses. 5. both the debtor and creditor(s) shall agree to a 74 DBOD-MC on IRAC Norms-2010 .. agree to be bound by the terms of the restructuring package that may be approved under the CDR mechanism.3. are likely to become performing after introduction of the CDR package. UTI. could join CDR mechanism of a particular corporate by signing transaction to transaction ICA. The ICA signed by the creditors will be initially valid for a period of 3 years and subject to renewal for further periods of 3 years thereafter.. who have not joined the CDR system. Under this clause.3 In order to improve effectiveness of the CDR mechanism a clause may be incorporated in the loan agreements involving consortium / syndicate accounts whereby all creditors. with necessary enforcement and penal clauses. including those which are not members of the CDR mechanism. 5. all participants in the CDR mechanism through their membership of the Standing Forum shall have to enter into a legally binding agreement. The lenders in foreign currency outside the country are not a part of CDR system. it is expected that all other creditors (i. the creditors shall agree that if 75 per cent of creditors by value and 60 per cent of the creditors by number. Such creditors and also creditors like GIC..

legally binding 'stand-still' whereby both the parties commit themselves not to take recourse to any other legal action during the 'stand-still' period. in order to avoid the "free rider" problem. is to be provided by all creditors of a 'standard' or 'substandard account' irrespective of whether they are working capital or term creditors.5. this would be necessary for enabling the CDR System to undertake the necessary debt restructuring exercise without any outside intervention.1 a creditor (outside the minimum 75 per cent and 60 per cent) who for any internal reason does not wish to commit additional finance will have an option. 5. can be crystallised. 5. to be worked out under the restructuring package. derivative products. etc. judicial or otherwise. during the stand-still period. provided the borrower is agreeable to such crystallisation. the stand-still clause will be applicable only to any civil action either by the borrower or any lender against the other party and will not cover any criminal action. At the same time.4. whether existing creditors or new creditors. that creditor will have an option in accordance with the provisions of para 5. Further. The borrower will additionally undertake that during the stand-still period the documents will stand extended for the purpose of limitation and also that he will not approach any other authority for any relief and the directors of the borrowing company will not resign from the Board of Directors during the stand-still period. it is necessary to provide some disincentive to the creditor who wishes to exercise this option..5 Exit Option 5. Such creditors can either (a) arrange for its share of additional finance to be 75 DBOD-MC on IRAC Norms-2010 . However.2 The providers of additional finance. over the providers of existing finance with respect to the cash flows out of recoveries. outstanding foreign exchange forward contracts.5.6.4. In case for any internal reason. shall have a preferential claim. on a pro-rata basis. any creditor (outside the minimum 75 per cent and 60 per cent) does not wish to commit additional financing.1 Additional finance. if any. in respect of the additional exposure 5.1 As stated in para 5.4 Sharing of Additional finance 5.

5. 5. and if a minimum of 75% of creditors (by value) and 60% creditors (by number) satisfy themselves of the viability of the account and consent for such restructuring. Hence. as a part of the restructuring package.provided by a new or existing creditor. Further payment commitments of the borrower arising out of such OTS may be factored into the restructuring package. without compounding.6.3 The lenders who wish to exit from the package would have the option to sell their existing share to either the existing lenders or fresh lenders.4 In order to bring more flexibility in the exit option. If an account with any creditor is subjected to One Time Settlement (OTS) by a borrower before its reference to the CDR mechanism.1 There have been instances where the projects have been found to be viable by the creditors but the accounts could not be taken up for restructuring under the CDR system as they fell under 'doubtful' category.5. any fulfilled commitments under such OTS may not be reversed under the restructured package. at an appropriate price. The exiting lenders may be allowed to continue with their existing level of exposure to the borrower provided they tie up with either the existing lenders or fresh lenders taking up their share of additional finance. or (b) agree to the deferment of the first year's interest due to it after the CDR package becomes effective. One Time Settlement can also be considered. 5.5. wherever necessary.2 In addition. The new lenders shall rank on par with the existing lenders for repayment and servicing of the dues since they have taken over the existing dues to the exiting lender. subject to the following conditions : (i) It will not be binding on the creditors to take up additional financing 76 DBOD-MC on IRAC Norms-2010 .5.6 Category 2 CDR System 5. will be payable along with the last instalment of the principal due to the creditor. a second category of CDR is introduced for cases where the accounts have been classified as 'doubtful' in the books of creditors. the exit option will also be available to all lenders within the minimum 75 percent and 60 percent provided the purchaser agrees to abide by restructuring package approved by the Empowered Group. which would be decided mutually between the exiting lender and the taking over lender. The first year's deferred interest as mentioned above. 5.

asset classification status during the pendency of restructuring under CDR. In other words. banks may formulate. will continue to be applicable to this category also. under the proposed second category of the CDR mechanism.2 No individual case should be referred to RBI.worked out under the debt restructuring package and the decision to lend or not to lend will depend on each creditor bank / FI separately.6. 5. 5.6.3 All the other features of the CDR system as applicable to the First Category will also be applicable to cases restructured under the Second Category. etc. there exists a much simpler mechanism for restructuring of loans availed by Small and Medium Enterprises (SMEs). a debt restructuring scheme for SMEs within the prudential norms laid down by RBI. This mechanism will be applicable to all the borrowers which have funded and non-funded outstanding up to Rs. The right of recompense should be based on certain performance criteria to be decided by the Standing Forum.7 Incorporation of 'right to recompense' clause All CDR approved packages must incorporate creditors' right to accelerate repayment and borrowers' right to pre-pay. Major elements of this arrangements are as under : (i) Under this mechanism. 5. (ii) All other norms under the CDR mechanism such as the standstill clause. Unlike in the case of CDR Mechanism.10 crore under multiple /consortium banking arrangement. B SME Debt Restructuring Mechanism Apart from CDR Mechanism. the operational rules of the mechanism have been left to be formulated by the banks concerned. with the approval of their Board of Directors. Banks may frame different sets of policies for borrowers 77 DBOD-MC on IRAC Norms-2010 . CDR Core Group may take a final decision whether a particular case falls under the CDR guidelines or it does not.. the existing loans will only be restructured and it would be up to the promoter to firm up additional financing arrangement with new or existing creditors individually.

(vi) Banks may review the progress in rehabilitation and restructuring of SMEs accounts on a quarterly basis and keep the Board informed. along with the bank having the second largest share. at the minimum. include parameters indicated in these guidelines. (iv) Banks should work out the restructuring package and implement the same within a maximum period of 90 days from date of receipt of requests. banks may ensure that the scheme is simple to comprehend and will. (v) The SME Debt Restructuring Mechanism will be available to all borrowers engaged in any type of activity. (ii) While framing the scheme. 78 DBOD-MC on IRAC Norms-2010 .belonging to different sectors within the SME if they so desire. (iii) The main plank of the scheme is that the bank with the maximum outstanding may work out the restructuring package.

alteration of repayment period / repayable amount/ the amount of instalments / rate of interest (due to reasons other than competitive reasons). (iv) Restructured Accounts A restructured account is one where the bank. However. In other words. 79 DBOD-MC on IRAC Norms-2010 . the bank's dues are considered to be fully secured.BC. of the promoter / others. grants to the borrower concessions that the bank would not otherwise consider.01/2006-07 dated April 30.09. for this purpose the bank guarantees. 2007 as modified from time to time. bills discounted / purchased. primary as well as collateral securities would be reckoned. extension or deferment of EMIs to individual borrowers as against to an entire class.. provided such securities are tangible securities and are not in intangible form like guarantee etc.Plan. etc. State Government Guarantees and Central Government Guarantees will be treated on par with tangible security. extension in repayment tenor of a floating rate loan on reset of interest rate. (iii) Fully Secured When the amounts due to a bank (present value of principal and interest receivable as per restructured loan terms) are fully covered by the value of security. and investments other than that in the nature of equity. duly charged in its favour in respect of those dues.No. which would generally include. so as to keep the EMI unchanged provided it is applied to a class of accounts uniformly will not render the account to be classified as „Restructured account‟. (ii) Agricultural Activities As defined in RPCD circular RPCD. overdrafts. factored receivables.84/04. for economic or legal reasons relating to the borrower's financial difficulty. Restructuring would normally involve modification of terms of the advances / securities. would render the accounts to be classified as 'restructured accounts.Annex .5 Key Concepts (i) Advances The term 'Advances' will mean all kinds of credit facilities including cash credit. However. among others. term loans. While assessing the realisable value of security.

All Agricultural Accounts In the case of agricultural accounts.No. if the second restructuring takes place after the period upto which the concessions were extended under the terms of the first restructuring.(v) Repeatedly Restructured Accounts When a bank restructures an account a second (or more) time(s). the account will be considered as a 'repeatedly restructured account'. In addition. (vi) SMEs Small and Medium Enterprise (SME) is an undertaking defined in RPCD circulars RPCD. at the end of the specified period the account should be regular. (vii) Specified Period Specified Period means a period of one year from the date when the first payment of interest or installment of principal falls due under the terms of restructuring package. Non-Agricultural Term Loan Accounts In the case of non-agricultural term loan accounts. there should not be any overdues at the end of the specified period. (viii) Satisfactory Performance Satisfactory performance during the specified period means adherence to the following conditions during that period. that account shall not be reckoned as a 'repeatedly restructured account'. However.06.BC. for a duration of more than 90 days.02/2006-07 dated April 4. the account should not be out of order any time during the specified period. no payment should remain overdue for a period of more than 90 days. In addition there should not be any overdues at the end of the specified period. 2007 amended from time to time.63. 80 DBOD-MC on IRAC Norms-2010 .PLNFS. Non-Agricultural Cash Credit Accounts In the case of non-agricultural cash credit accounts.

Annex . (Rs.6 Particulars of Accounts Restructured Amt. of Borrowers Amount outstanding Sacrifice (diminution in SME Debt Others Restructuring advances restructured 81 DBOD-MC on IRAC Norms-2010 . in crore) CDR Mechanism Standard advances restructured No. of Borrowers Amount outstanding Sacrifice (diminution in the fair value) Doubtful advances restructured No. of Borrowers Amount outstanding Sacrifice (diminution in the fair value) TOTAL No. of Borrowers Amount outstanding Sacrifice (diminution in the fair value) Sub standard No.

12.03.2007 31.f 31.03.07 payment due under the revised terms 82 DBOD-MC on IRAC Norms-2010 .12.2007 delinquency as on restructuring Asset Classification'Standard' (AC) restructuring Date of NPA NA NA before 'Standard' 'Doubtful less -'Doubtful than than less one year' 31.07 31.Annex .01.01.07 31.2007 Case 1 Case 2 Case 3 Case 4 due 31.e.03.7 Asset Classification of Restructured Accounts under the Guidelines Asset Classification of Restructured Accounts under the Guidelines Particulars I Assumed date of payment Assumed date of 31.03.12.e.2007 restructuring Period the date of2 months of 2 months 18 months 18 months 31.05 (Assumed) (Assumed) II Asset classification (AC) on restructuring Assumed status of Eligible the borrower special regulatory treatment AC restructuring after 'Standard' for Not for eligible Eligible for Not eligible special special treatment for special regulatory regulatory treatment -'Doubtful one year' than regulatory treatment Downgraded 'Doubtful to less 'Substandard' one year' w.07 (i.12.05 one year' 31.2007 31.12.03. on the date of thanless restructuring) Assumed first31..2007 31.07 31.12.

e.III Asset classification after restructuring A The account performs satisfactorily as per restructured terms (a) AC during the No specified year (i.e.f. year period (in w.09 years' three w.f.03.f case the 30.e.e.12..f. 30. more thanthree years'w. remains than one year' (i.e.2011. 31.12.less 'Doubtful 'Doubtful Upgraded 'Standard' category to specified year period one substandard than one year' one to three one to three w..f.03.e.12.12. one year 31.2007 31.07 31.07 (i.e.03.12. . period 'Standard') from to w.2011.e.08) change 'Doubtful .less No change 'Doubtful - one (i. 31. if one to three to three years'..04.31.f.06) (on year effect 30.03.09 and and performance continues 'Doubtful more three w.04.12.e. than31.oneto 'Doubtful further year period. w.09 than years' unsatisfactory 30.08 years' w.e.e.e.'Doubtful .08. 83 DBOD-MC on IRAC Norms-2010 .e.f.e.f..f.04. 31.f.f.08 remains (i.e. one year after classification as 'Doubtful unsatisfactory and performance is downgraded classification established before completion one period) (b) AC after to 'Doubtful less than one of year' with from less than one year' 31. years' (i.12. the Will migrateWill migrate to Will migrate Will migrate to specified one to 'Doubtful . 31. thanone year after classification as 'Doubtful classification as one year') 'Substandard') less than one year') (b) AC after the Continues in Upgraded one'Standard' category 'Standard' category to Upgraded to 'Standard' category B If performance not satisfactory vis-à-vis restructured terms (a) AC during the Treated specified as 'Doubtful .e.4.e. 31. one year 'Doubtful after less one to three years' w.07 (i.e.09three years'more 'Doubtfulw. 31..07 after w.more than'Doubtful the years' w.12.e.f.

it has been decided to extend exceptions / special treatment to the commercial real estate exposures which are restructured up to June 30.04. To address this problem.132/2008-09 dated August 27. 2009. certain modifications were made in the guidelines on restructuring i.DBOD.105/21.No. 2008.BC. (ii) In terms of para 6. 2008.Annex-8 Special Regulatory Relaxations for Restructuring (Available upto June 30. 2009 vide our circular RBI/2008-09/311.37/21. 2009.BC. 2009 and RBI/ 2008-09 /435 DBOD.e RBI/2008-09/143 DBOD. No.DBOD. as a one-time measure. 2009. there are likely to be instances of even viable units facing temporary cash flow problems. BC. These guidelines are as below: i) In terms of para 6. No.DBOD. These circular will cease to operate from July 1.2(vi) of the aforesaid circular. capital market exposures and personal / consumer loans) upto June 30.DBOD.132/2008-09 dated February 4. BP. it has been decided. 2008 would be treated as standard accounts on restructuring provided the restructuring is taken up on or before March 31. RBI/2008- 09/370.37/21.No. 2008 which were standard accounts on September 1.No.104/21.2 of the circular.132 /2008-09 April 17.BP.04. 2009.BP. the special regulatory treatment is restricted only to the cases where the restructuring under consideration is not a 'repeated restructuring as defined in para (v) of Annex 2 to the circular.1 of the circular RBI/ 2008-09 /143 .132/2008-09 dated December 8. In the face of the current economic downturn.BC . As the real estate sector is facing difficulties. 2009. BP. exposures to commercial real estate. will also be eligible for exceptional / special regulatory treatment (iii) All accounts covered under the circular dated December 8.132 /2008-09 dated August 27. 84 DBOD-MC on IRAC Norms-2010 . 2009) Since the spillover effects of the global downturn had also started affecting the Indian economy particularly from September 2008 onwards creating stress for the otherwise viable units / activities.93/21.BC.124 /21.BC.132/2008-09 dated January 2. RBI/200809/340.2.BP.BP. capital market exposures and personal / consumer loans are not eligible for the exceptional regulatory treatment of retaining the asset classification of the restructured standard accounts in standard category as given in para 6. that the second restructuring done by banks of exposures (other than exposures to commercial real estate. 2009 and the restructuring package is put in place within a period of 120 days from the date of taking up the restructuring package.04.04.No.04. 2008 as a onetime measure and for a limited period of time i.04.e. up to June 30.

1. owing to the current downturn. 2008 and December 8. Sub-standard Assets : 20% during the first year and to be increased by 20% every year thereafter until the specified period (one year after the first payment is due under the terms of restructuring). 2008 even where full security cover for WCTL is not available. 2008 also. as an incentive for quick implementation of the package. * These provisions would be in addition to the usual provisions as per the current regulation. as under : * * Standard Assets : 20%. 85 DBOD-MC on IRAC Norms-2010 . (vi) In this connection. the asset classification status may be restored to the position which existed when the reference was made to the CDR Cell in respect of cases covered under the CDR Mechanism or when the restructuring application was received by the bank in non-CDR cases : (i) (ii) Within 120 days from the date of approval under the CDR Mechanism. we advise that in terms of Para 3. this special regulatory treatment will also be available to 'standard' and 'sub-standard accounts'.(iv) The period for implementing the restructuring package would stand extended from 90 days to 120 days in respect of accounts covered under the circular dated August 27. covered under circulars dated August 27.2 of the circular dated August 27. The process of reclassification of an asset should not stop merely because the application is under consideration. (v) The value of security is relevant to determine the likely losses which a bank might suffer on the exposure should the default take place. However. the unsecured portion will attract provision of 100%. 2008. during the pendency of the application for restructuring of the advance. However. if the approved package is implemented by the bank as per the following time schedule. subject to the condition that provisions are made against the unsecured portion of the WCTL. This aspect assumes greater importance in the case of restructured loans. Within 90 days from the date of receipt of application by the bank in cases other than those restructured under the CDR Mechanism. In view of the extraordinary situation. If the account is not eligible for upgradation after the specified period. the usual asset classification norms continue to apply. may not be available due to fall in the prices of security such as inventories. the full security cover for the WCTL created by conversion of the irregular portion of principal dues over the drawing power.

it has been decided. what it means is that in all subsequent reporting. 2008 extend special regulatory treatment for asset classification to seven projects (listed below) where the commencement of production/operation had already been considerably delayed.Phase -II) Gautami Power Ltd. These seven projects are: 1) 2) 3) 4) 5) 6) 7) Nandi Economic Corridor Enterprises Ltd. All those accounts in case of which the packages are in process or have been approved but are yet to be implemented fully will have to be reported as NPA as on March 31. 2008 (as amended till date) are also complied with. 2009 only if the restructuring package is implemented before 31st March 2009 and all conditions prescribed in para 6.. the account will be reported as standard and any provisions made because of its interim slippage to NPA can be reversed. upon restructuring as per our aforesaid circular dated August 27.2.. All other extant norms relating to IRAC and restructuring of advances remain unchanged. these can be reported as standard as on March 31.. 2008 but slipped to NPA category before 31st March 2009. viii)The circular dated November 14. (Gas-based Power Project) Delhi Gurgaon Super Connectivity Ltd. as a one-time measure. 86 DBOD-MC on IRAC Norms-2010 .. that the aforesaid seven projects under implementation. it may be clarified that reporting with retrospective effect does not mean reopening the balance sheet which is already finalised. 2009 if they have turned NPA in the normal course. (Gas-based Power Project) New Tirupur Area Development Corporation. However. In this regard. having regard to the current market developments. would be categorised in 'standard' category even if the account was NPA at the time of such restructuring provided such restructuring package is implemented within a period of six months from the date of this circular. 2008. (Road Project and Township) GVK Industries Ltd. these accounts can be reported as standard assets with retrospective effect from the date when the reference was made to the CDR Cell in respect of cases covered under the CDR Mechanism or when the restructuring application was received by the bank in non-CDR cases.(vii) It is further clarified that the cases where the accounts were standard as on September 1. In case the projects are found eligible for restructuring and the banks concerned chose to undertake their restructuring. (Gas-based Power Project) Konaseema Gas Power Ltd.2 of the circular dated August 27. (Gas-based Power Project . The banks were advised that they may undertake a fresh financial viability study of these projects in order to assess their eligibility for restructuring. in any regulatory reporting made by the bank after the date of implementation of the package within the prescribed period. (Development of Tirupur Area) Vemagiri Power Generation Ltd.

Of (1). proposals under process / implementation which were standard as on March 31. 2009 but are expected to be classified as standard assets on full implementation of the package.) Disclosures Number 1. 87 DBOD-MC on IRAC Norms-2010 . 2009 for restructuring in respect of accounts which were standard as on September 1. 2008. proposals under process / implementation which turned NPA as on March 31. 4. Of (1). 2. proposals approved and implemented as on March 31. proposals approved and implemented as on March 31. 2009. No Amount (in Crore of Rs. Application received up to March 31. Of (1). 5. Of (1). 2009 and thus became eligible for special regulatory treatment and classified as standard assets as on the date of the balance sheet. 2009 but could not be upgraded to the standard category. banks may also disclose the information in the balance sheet as detailed below: Additional Disclosures regarding Restructured Accounts S.(ix) In addition to the disclosures required in terms of our circular dated August 27. 3. 2008.

96/08.0 4.03. Asset Classification and Provisioning Pertaining to Advances .BP.2010 5.2.82/21. Asset Classification and Provisioning pertaining to Advances .1 2.15 2. DBOD.048/2009-10 5.No. 2008 . 3.No. Asset Classification.2009 3.No. Circular No.2009 8.No.048/2009-10 31.Projects under Implementation Agricultural Debt Waiver and Debt Relief Scheme. DBOD. DBOD.46/21.5 (i) 05. 2008 .3.2.4 3. 21.048/2009-10 24.Annex .0 4.Prudential Norms on Income Recognition.35/21.2009 6.11.BC.BC.0 4.BP.4 (ii).6.2009 Prudential Treatment in respect of Floating Provisions 5.4 31. and 5.08. Provisioning and Capital Adequacy Para No.12. Annex -1 7.014/2009-10 23.BP.2010 3.BP.BC. DBOD.5.BC.08.03.3. Date Subject Prudential Norms on Advances to Infrastructure Sector Prudential Norms on Income Recognition.2. Provisioning and Capital Adequacy Second Quarter Review of Monetary Policy for the Year 2009-10 Provisioning Coverage for Advances Second Quarter Review of Monetary Policy for the Year 2009-10 Provisioning Requirement for Standard Assets Prudential Norms on Income Recognition.Computation of NPA Levels Agricultural Debt Waiver and Debt Relief Scheme.0 4.85/21.64/21.048/2009-10 27.No.3 88 DBOD-MC on IRAC Norms-2010 .Prudential Norms on Income Recognition.9 (Cf.BC.0 4. Asset Classification.BC.4 30.048/2009-10 21. para 2 of the covering letter to the circular) List of Circulars consolidated by the Master Circular on IRAC Norms Sl.048/2009-10 01.No.BP.2009 5. DBOD. 21. 21.2.No. 21.33/21.No.2010 4.09.BC. No.4 (iii) (b) 4.BP. 1.BP.58/21. of the MC DBOD.BP.048/2009-10 21.10.04. DBOD. DBOD.0 4.BC. Annex 3 5.0 4.

BC.No. 048/2008-09 25/03/2009 Prudential Treatment of different Types of Provisions in respect of Loan Portfolios 16.4(iii) 17.83/21.BC.124/21.Agricultural Debt Waiver DBOD. 04.6. DBOD.BP.01.No. 048/2008-09 11.BC. 048/2008-09 and Debt Relief Scheme. 25.125/21.118/21.2 9.No.BP.BP.122/21.9.BC. Provisioning and Capital Adequacy 15.BC.Prudential Norms on IRAC.04.No. 048/2008-09 17.04.132 /2008-09 17.04.2 21.BC. DBOD.No. DBOD.3.BP. Commercial Real Estate and NBFCND-SI 5.Provisioning for Standard Assets and Risk Weights for Exposures to Corporates. 5.132/2008-09 12.2009 Prudential guidelines on Restructuring of Advances Prudential guidelines on Restructuring of Advances.03.12.93/21.04.BC.140/21.No.04.04.06. DBOD.105/21.BP.2008 Prudential guidelines on Restructuring of Advances Annex 8 19.Prudential Norms on IRAC. DBOD.BP.9.01.2009 04.BP.2009 09.4. 21.132/ 2008-09 08.BP.BC.5 89 DBOD-MC on IRAC Norms-2010 .002/ 2008-09 15/11/2008 Review of Prudential Norms .BP.04. DBOD.04.112/21.121/21. DBOD.132 /2008-09 02.2 5. 048/2008-09 05.2009 2008 . 2008 .BP. 5.3 11.BC.7. DBOD. DBOD. 5. Provisioning and Capital Adequacy 10.10 Annex 8 Annex 8 18.BC.02.04.104/21.9.04.BP.2009 09/04/2009 Annex 4 5.2009 Prudential Norms on Unsecured Advances Prudential Guidelines on Restructuring of Advances Prudential Treatment in respect of Floating Provisions 13.No.04.04.BC.2009 Prudential guidelines on Restructuring of Advances Agricultural Debt Waiver and Debt Relief Scheme.132 /2008-09 14. DBOD.6. 5.

78/21.No. DBOD.48/21.2.2 (vii).12 29.04.BC.0 48/2008-09 14/11/2008 Asset Classification Norms for Infrastructure Projects under Implementation 4.76/21.10.2008 Prudential guidelines on Restructuring of Advancescomprehensive guidelines Para 9 to 18 28.7 (iv) to 4.Agricultural Debt Waiver and Debt Relief Scheme.No.11. DBOD.04.03. 2008 .2008 (i) Disbursal of Loans against Sanctioned Limits (ii) Restructuring of Dues of the Small and Medium Enterprises (SMEs) Annex 4 25.BC.2.132/ 2008-09 27. DBOD.BP.7 (iv) 24.No. 048/2008-09 30.58/21.04.2.2 23.7 (vii) 26.2.69/21.No.04.BC.11. DBOD.2008 Agricultural Debt Waiver and Debt Relief Scheme. 4.37/21. DBOD.BP.BC.BP.BC.07.Prudential Norms 20 90 DBOD-MC on IRAC Norms-2010 .04.1.04.Prudential Norms on IRAC.2.0 48/2008-09 22/09/2008 Prudential Norms on Utilisation of Floating Provisions .04.84/21. Provisioning and Capital Adequacy 21.BP.BP.No.15.1 57/2008-09 13/10/2008 Prudential Norms for Offbalance Sheet Exposures of Banks 2.26/21.08.No.57/21.BP. DBOD.BC.1.BP. DBOD.BP.1 57/2008-09 08/08/2008 Prudential Norms for Offbalance Sheet Exposures of Banks 2.BP. DBOD. 5.6. 2008 5.2008 Prudential guidelines on Restructuring of Advances 14.04. DBOD.BC. 048/2008-09 11.No.20.2 (vii).9.BC.132/ 2008-09 03.2008 Agricultural Debt Waiver and Debt Relief Scheme.1 22.BP.BC.04.31/21.BC.048/ 2008-09 13. 2008 .2 27. DBOD.0 09/2008-09 29/10/2008 Prudential Norms for OffBalance Sheet Exposures of Banks 4. Annex 8 21.

6.No.BC. DBOD.on IRAC.No.BP.No.BC. DBOD.04 8/2007-08 08. DBOD.15 (iv) 31.04.BC.21/21.04.15 (iv) 34. DBOD. DBOD.BC.Projects Involving Time Overrun 4.04.0 48/2006-2007 12.2007 Third Quarter Review of the Annual Statement on Monetary Policy for the year 2006-07 Provisioning Requirement for Standard Assets and Risk Weights for Capital Adequacy 5.0 48/2006-07 12. Asset Classification and Provisioning Pertaining to Advances .BP.76/21.05.0 48/2006-07 16.2007 Guidelines on Purchase / Sale of Non Performing Assets 7.5 (iii) 32.01.0 48/2006-07 13.2006 Annual Policy Statement for the year 2006-07 Additional Provisioning Requirement for Standard Assets 5.82/21.2008 Prudential Norms on Asset Classification Pertaining to Advances Infrastructure Projects under Implementation and Involving Time Overrun 04.03.0 48/2007-08 7. Provisioning and Capital Adequacy 30.BC.06.04.04.2007 Guidelines on Purchase / Sale of Non Performing Assets 4.6 91 DBOD-MC on IRAC Norms-2010 .BP.BC.10.NO.07.2006 Prudential norms on creation and utilization of 5.BC.No.89/ 21.5 (i) 36.BP. DBOD.BP.68/21.53/21.2007 Prudential Norms on Creation and Utilisation of Floating Provisions 5.34/21.BP.No. DBOD.BP.04.2007 Prudential Norms on Income Recognition.No.05.5 (iii) 33.97/21.BC.048/ 2005-06 22. DBOD.0 48/2006-2007 31.2 35.5 (i) 37.BP.04.2.04.2.04.

BP.2005 Debt restructuring mechanism for Small and Medium Enterprises (SMEs) Announcement made by the Union Finance Minister Part B 43.048/ 2005-06 04.08.048/ 2005-06 29.85/ 21.2004 State Government guaranteed exposures 4.0421.2006 Annual Policy Statement for the year 2006-07: Additional Provisioning Requirement for Standard Assets 39.5(i) 42.16/ 21.BP.2005 MidTerm Review of Annual Policy Statement for the year 200506: Additional Provisioning Requirement for Standard Assets 5. DBOD.45 /21.NO.048/ 2005-06 13.07.04.048/2005-06 10.BC.04.11.BP.46 /21.BC.BC.5(i) Part B Part B 5.048/2005 -06 10.0421.BC.2005 Revised Guidelines on Corporate Debt Restructuring(CDR) Mechanism 40. DBOD.08.09.05.BP.40/ 21. DBOD.NO.NO.0 4.04.2005 Debt restructuring mechanism for Small and Medium Enterprises (SMEs) 41.04.BP. 34 /21.2005 Guidelines on purchase/sale of Non performing Assets 7 44.132/2005-06 08.29/21.BP.048/ 2004-05 13.NO.BC. DBOD.04.NO. DBOD.2.048/2004-05 26.34/21. DBOD.BC.BC.NO.floating provisions 38. DBOD.11.13(vi) 45. DBOD.04.11.2.14 92 DBOD-MC on IRAC Norms-2010 .BC.BP.2004 Repayment schedule of rural housing loans Prudential norms – 4.04.BP.

BC.04. DBOD No. DBOD No. DBOD BP.04.06.BC. Plan.06.02. 10.06.2003 Securitisation / reconstruction company and related issues 6 52.048/2003-04 21.04.04.BC 99/21. 71/21.2.2003 Upgradation of loan accounts classified as NPAs Agricultural loans 30.02.8 51.04.2004 Flow of credit to Agriculture Prudential Norms for 4.BC No.048/2003-04 24. BP.1.04.048/2002-03 4.(v) 4.4 50.048/2002-03 financial assets to 23.2.2004 Agricultural Advances 2.2(iv).BC 102/21. No.04.02. DBOD BP.04.BC 97/21. BP.2.9.2003 Projects under implementation involving time overrun 19.2.2.103/2002-2003 27. 74/21.2003 Risk Management Systems in Banks – Guidelines on Country Risk Management 5. 69/21.06.103/2003-04 17.BC 96/21. DBOD No.2004 Country Risk Management Guidelines Guidelines on sale of 5. BP.2004 Additional Provisioning Requirement for NPAs Prudential Guidelines on Unsecured Exposures 5 49.9. RPCD No. BP.04.10. BP. BP.BC 92/04.2002 affected by natural calamities 4.13(i) 48.BC 96/21.2. BP. DBOD No.5 DBOD.048/2002-2003 53. 4.048/2002-03 55.09.04.01/2003-04 24.06. DBOD No.141/2003-04 17.2004 5.BC.46.13 93 DBOD-MC on IRAC Norms-2010 . DBOD No.8 4. NO.15 54.13 (iv) 47. 44/21.11.

2 63.BC.04.01.2002 Corporate Debt Restructuring Part B 58.2001 Policy Measures 2001-02 30.1. BP. DBOD No.13 60.BP.BC.2001 SSI Advances Guaranteed by CGTSI – Riskweight and provisioning norms 5. 128/ 21. 100/ 21.04.048/2000-2001 07.03. 116 /21.2002 Income recognition.2001 Corporate Debt Restructuring Part B 62.048/2000-2001 14.2001 Treatment of Restructured Accounts Part B 2. 98/ 21. 15 / 21.09. Asset Classification and Provisioning for Advances 4.114/2000-2001 23.BP.04.15 57.2001 Income Recognition.BP.2002 Prudential norms on asset classification 4.BC.2. DBOD No.04.06.04.BP.048/2001-2002 28. BC.2002 Prudential norms on income recognition.05.BC. DBOD No.002/ 2001-02 09.56.BP.01.2001 Prudential norms on income recognition. asset classification and provisioning on advances treatment of projects under implementation involving time overrun 4.BC. 108/ 21. asset classification and provisioning 3 61. DBOD No. DBOD No. BC.BC.048/ 2000-2001 Monetary & Credit 02.1.048/ 2000-2001 94 DBOD-MC on IRAC Norms-2010 .05. BP.04.BP.9.048/2000-2001 11. DBOD No. DBOD No.BC. DBOD No.2. 59/ 21.05.BC.05. DBOD No.01. asset classification and Provisioning agricultural advances 4. 25/ 21. BP.BP.5 64.06. 101/ 21. DBOD No.2 59.04.04.08.048/2001-2002 22.2 65. 132/ 21.002/ 2001-02 09.

Asset Classification and Provisioning Agricultural Finance by Commercial Banks through Primary Agricultural Credit Societies 4.04. etc. 0 48/ 99 21.BC. 0 48/ 2000 07.04. DBOD.5 68.161/21.02. Asset Classification and Provisioning.04.No.No.99 Income Recognition Asset Classification and Provisioning Concept of Commencement of Commercial Production 4.18 70.99 Income Recognition.10.66.No.5 67.70/24.FSC.144/21.99 Equipment Leasing Activity Accounting/ Provisioning Norms 3.02. 40 / 21. DBOD.2000 Prudential Norms on Capital Adequacy. Income Recognition.2. Asset Classification and Provisioning Reporting of NPAs to RBI 3.2.10.10 71.BC.BP. 0 48/ 2000 24.048/ 2000-2001 30. DBOD.04.2000 Income Recognition.No. DBOD No.01.BC.2.2.07. Asset Classification and Provisioning and Other Related Matters and Adequacy Standards Takeout Finance 4.04.16 69.8 72. 5.15 95 DBOD-MC on IRAC Norms-2010 . BC. 5. 0 48/ 2000 29.2000 Income Recognition.BP.04.No.No.3. DBOD.BP. BP.05.BC.103/21. Asset Classification and Provisioning Export Project Finance 4. 001/ 99 17.0 4 8/99 10.45/21.04.BC.BC.BP. DBOD.2.2000 Income Recognition.BP.138/21. DBOD.

6/ 11.98 Monetary & Credit Policy Measures 4.97 Income Recognition Asset Classification and Provisioning Agricultural Advances 4.1 81.2.1. Income Recognition Asset Classification and Provisioning 4.97 Prudential Norms Capital Adequacy.1.04. DBOD.No.14/21.No.000/ Income Recognition 4.13 79.2.01.BP. 0 48/ 98 29.163/21.BP.97 Assessments relating to asset valuation and loan loss provisioning 5.BC. 4.1. DBOD.98 Prudential Norms on Income Recognition.0 4 8/97 09.13 75. DOS.5 4.No.01. 0 02/ 98 31.120/21.02. 4.04. DBOD.04.No.04.06.97 Income Recognition Asset Classification and Provisioning Agricultural Advances 4.103/21.2. 25.0 48/96 04.2. No.9/21. DBOD.2.8.04.PP. 5.2.2.04.04. DBOD.04. DBOD. DBOD.BC.2.98 Prudential norms on Income Recognition.12.BC.2.10.BC.73.No. Asset Classification and Provisioning Agricultural Loans Affected by Natural Calamities 4.12.96 Asset Classification and Provisioning 4.4.13 78.01.BP.BC.BP.29/21. BC.BP.0 48/97 19.65/21. Asset Classification and Provisioning Agricultural Advances 76.1 77.0 4 8/98 04.05.BP.03.04 8 /97 29.005/ 9697 15.1. 0 48/ 96 Classification of 24.9 80. CO. 4.17/21. 4.96 Advances with Balance less than Rs.13 74.BP.No.BP.BC.BC.5. DBOD.8 96 DBOD-MC on IRAC Norms-2010 .No.BC.No.2.

94 Income Recognition Asset Classification and Provisioning and Capital Adequacy Norms Clarifications 5 88. DBOD.93 97 Income Recognition.95 EXIM Bank's New Lending Programme Extension of Guarantee cum Refinance to Commercial Bank in 4.95/21.No.17 5.No. Provisioning and Other Related Matters 3.0 48/96 19.No.BP. DBOD.04. 4.BP.03.2.8/21.BC.BP.134/21.14 84.2 92.4.11.03.11. 3.0 4 894 16.No.94 Income Recognition Asset Classification Provisioning and Other Related Matters 3.58/21.94 Income Recognition Asset Classification and Provisioning 5.BP. DBOD.04.26/21.No.04.82. 4. 0 48/ 93 24.05.04.BC.04.94 Credit Monitoring System Health Code System for Borrowal Accounts 1.04.0 48/96 19. DBOD.9.BP.4 89.17 respect of Post shipment Supplier's Credit 85.BC.04.BC.0 48/94 30. DBOD.04.95 Asset Classification and Provisioning 14.96 Nonperforming Advances Reporting to RBI 3. 4.04.BC.1.93 Income Recognition.8.2.BC. DBOD. 0 48/ 94 87.BP.14.2. DBOD.BP.0 48/95 Income Recognition 03.2.BP.50/21.02.04.2.2.04.3 90.8. 5 DBOD-MC on IRAC Norms-2010 .2.No.96 Income Recognition Asset Classification Provisioning and 4.1 5 86.134/21.0 23.03.BP.4/16.BC.36/21. 3. DOS.04 3 /94 04.BC. DBOD.BC.No.94 Income Recognition.3.5 83.No.2 91.BC. Asset Classification and Provisioning Clarifications 4.195/21. Asset 3.BC.2. DBOD.BP.11.03.04.No. 0 48/ 95 20.001/9394 19.25/21.No. DBOD.

3.BC. DBOD.04. DBOD.2 98.1.1 96. DBOD.1. DBOD. Asset Classification and Provisioning Clarifications 3.2 94.1.BP. 27.No. 5.0 4 392 17.04. 4.42/C. DBOD.92 Income Recognition.BC.04. Asset DBOD. Factoring.85 Credit Monitoring System Introduction of Health Code for Borrowal Accounts in Banks 1.469 (W)90 31.48/93 Classification.BP. 3. 1.BP.1.249 85 07. 0 4392 Classification.01.1.2.1.2. 2. 3.0 02/99 24. 4. 001/ 9394 19.No.59/21.1.BC. 4.94 Equipment Leasing.1.BC. 4.1.1.2.BC.3.1.92 Income Recognition. 4.99 Monetary & Credit Policy Measures 4.2.02.1.2.3.FSC. 2.10.1.35/21.No. 5.18/24. Provisioning and Other Related Matters 1. Activities 2.90 Classification of Non Performing Loans 3. 3.1.3 97.4 95.Fol.2.2.BC.No.1. etc.01.3 98 DBOD-MC on IRAC Norms-2010 . Provisioning and Other Related Matters 93.3.2.129/21.No. 5.2. 5.12.No. 4.BP.136/C.11.04. Hire Purchase.